Chinese stocks and the yuan on the rise on the hope of a last-minute trade deal By Reuters

By Andrew Galbraith and Noah Sin

SHANGHAI / HONG KONG (Reuters) – Chinese stocks and the yuan strengthened on Friday in Beijing and Washington may still be able to avoid a trade deal, although confidence remained fragile less than a year ago. hour before the expected rise in US tariff on Chinese products effect.

Chinese Vice Premier Liu He, US Trade Representative Robert Lighthizer, and US Treasury Secretary Steven Mnuchin spoke for 90 minutes Thursday in Washington and were scheduled to resume negotiations on Friday.

Chinese tariff increases are expected to come into effect at 0:01 GMT on Friday. While Asian markets were up, investor confidence should remain volatile and driven by headline news.

"Market sentiment has improved following the progress of the latest Sino-US trade round, resulting in a rebound after recent falls," said Zhou Liang, founder of Shanghai Minority Investment Management. "Although facing an escalation of the trade war, the market has been much stronger this year than last year, reflecting the increased confidence of Chinese investors."

In the late morning, the benchmark rose 1.3% after reaching its lowest level in 11 weeks in the previous session. But it was down from previous highs that had seen the index climb 2.6%.

China's first-rate CSI300 index rose 1.5%, up from 3% previously.

In Hong Kong, the index rose 0.5%, while H shares rose 0.6%.

The smallest index in Shenzhen was up 1.8% and the ChiNext Composite index of the young company was up 2.1%.

The Chinese yuan rose 0.1% to 6.8191 to the dollar, although the Chinese central bank has set the lowest point in the currency's daily trading band to its lowest level in three and a half months before the opening of the market, at 6.7912 per dollar.

"The market is no longer as worried." The magnitude of the rebound depends on whether rate increases will continue to occur at noon, if both parties agreed to continue talking and if the US president will meet Liu He, "said a Shanghai-based trader at the Chinese bank, commenting on the yuan.

The silver bullet came after a spot market sell-off on Thursday's tariff war, though traders are expecting an even bigger drop.

The firming of morning trade, but by the end of the morning, had lost all its gains to $ 6.8430 per dollar. It had weakened to a low of 6.8363 for a dollar on Thursday.

Zhou Hao, an emerging economy economist at Commerzbank (DE 🙂 in Singapore, said the yuan's increases were largely driven by changes in market sentiment.

"Trump is very capricious and investor sentiment has gone from excessive optimism to excessive pessimism," he said. "Without these twists, a rise in tariffs would be negative for the market, but investors now believe that even higher tariffs, as long as trade negotiations continue, is a good thing," he said. he adds.

Zhou said that he did not think the rebound would be sustainable and that he expects the yuan to trade in a range of 6.75 to 6.9 per dollar.