Markets may get more than just a lump of coal for this year’s Santa Claus rally as assets broadly appear set for a strong rally amid signs that the U.S. trade war may not ratchet up as quickly as previously expected.
The U.S. trade war hit the pause button at the G-20 meeting in Buenos Aires, with U.S. President Trump and Chinese President Xi Jinping agreeing to hold off on planned tariff increases for 90 days while trade talks continue. The dinner meeting between the two had been closely watched, with markets already beginning to price in optimism ahead of time that something positive might emerge.
“Thankfully for risk sentiment, the ‘dinner date of the decade’ ended with a sense of harmony rather than trade war discord,” Stephen Innes, head of Asia Pacific trading at OANDA, said in a note on Monday. But he added, “Alas, the truce is favorable, but only in the short duration as the markets straw polls post G-20 are factoring in a 60 percent chance that trade war escalates and higher tariffs are potentially applied.”
The Trump administration has put a 10 percent tariff on US$200 billion worth of imports from China; before this latest agreement, that had been set to increase to 25 percent on 1 January. In exchange, China has agreed to start buying “a not yet agreed upon, but very substantial” amount of U.S. agricultural products, effective immediately.
It’s not yet clear if that will be enough to head of rising bankruptcies among U.S. farmers who have been hard hit by retaliatory tariffs from China, as well as by Trump pulling the U.S. out of the Trans-Pacific Partnership trade deal, which has made it more difficult for them to access other regional markets, such as Japan.
Nikkei 255 index December futures were up 275 points at 22,695 at 7:52 A.M. SGT, according to CME Group futures; that compared with the index’s close at 22,351.06 on Friday.
Singapore’s Straits Times Index added 0.26 percent to 3117.61 on Friday; December futures for the index were at 3115 on Friday, while January and February futures were at 3117 and 3119 respectively.
Hong Kong’s Hang Seng Index was up 0.21 percent at 26,506.75 at Friday’s close, while China’s CSI 300 was up 1.12 percent at 3172.69.
Malaysia’s KLCI index was down 0.97 percent at 1679.86 at Friday’s close, while Indonesia’s IDX Composite shed 0.84 percent to 6056.12.
The Dow Jones Industrial Average tacked on 0.79 percent to 25,538.46 by Friday’s close, the Nasdaq Composite gained 0.79 percent to 7330.537 and the S&P 500 rose 0.82 percent to 2760.17. Futures for the three indexes surged in early trade, with Dow Jones Industrial Average futures up more than 400 points.
Nymex WTI crude oil futures for January were up 2.59 percent at US$52.25 a barrel at 7:28 A.M.. SGT, while ICE Brent crude oil futures for February were up 2.20 percent at US$60.77 a barrel at 7:28 A.M. SGT, according to Bloomberg data.