By Abhinav Ramnarayan
LONDON (Reuters) – Hope for progress in trade talks between the US and China hit a record four months on Wednesday, as the accommodative backdrop of major central banks also helped push markets towards black.
US President Donald Trump said negotiations with China were proceeding well and had hinted that he was willing to extend the deadline to complete them beyond March 1st.
Until now, it was assumed that US tariffs on Chinese imports worth $ 200 billion would increase from 10% to 25% if no trade agreement was concluded. here there.
Asian equities skyrocketed following Trump's comment, and European stock indexes also strengthened, with a pan-European index gaining 0.3%, pushing the MSCI world stock index, which tracks shares in the stock market. 47 countries, at its highest level in four months.
US stock futures have suggested that Wall Street will keep Tuesday's strong gains and stay flat. [.N]
"I would say that the market is very much in agreement at this point, and it has some merit in that, because I do not think you're going to have such a good negotiation period for a couple of weeks unless you feel that you get somewhere, "said Craig Erlam, chief market analyst at OANDA, a foreign exchange broker.
"The comments of an extension suggest that Trump is positive about the direction of the trip."
He added, however, that the market remained vulnerable to any further decline.
DOVISH CENTRAL BANKS
While hopes for a trade deal between the two largest economies in the world are seen as the main driver of global equities, the messages from the central bank of Dovish also play a role.
Fed Chairman in New York, John Williams, said on Tuesday that he was comfortable with the level of US interest rates and that he did not see the need for raise them unless economic growth or inflation is unexpectedly higher.
Investors also expect Wednesday's minutes of the Federal Reserve's January meeting, when policymakers have actually reported no further rate hike or any changes to balance sheet normalization. .
In Europe, there is growing expectation that the European Central Bank will revive a program to provide cheap long-term loans to banks in order to revive a declining economy, while the Bank of Japan has announced that she was willing to relax more.
The largest MSCI index of Asia-Pacific equities outside Japan rose 1.1%, marking its highest level since October 2nd.
Hong Kong's Hang Seng rose to 1.3%, its highest level in six months, while the Korean Kospi and Taiwan indexes returned to their previous level in early October. Japan's Nikkei added 0.6% to its highest level in two months.
On the currency markets, the dollar has stabilized against a basket of major currencies, after suffering its biggest single day loss this month. He had also recorded big slips against the euro and the pound sterling.
The greenback edged up 0.2% against the yen after Japan recorded its largest annual decline in exports in January for more than two years, and according to recent dovish signals from the Bank of Japan .
Markets were also focused on news feeds on the Brexit front, with the British Pound retaining most of its gains after a 1% rise on Tuesday as British Prime Minister Theresa May traveled to Brussels to try to move the negotiations forward.
The yuan rose 0.6 percent against the dollar, its biggest gain for more than a month, after Bloomberg reported on Tuesday that the United States was seeking a promise from China that it would not be worth it. they would not devalue the currency in their currency. of a commercial agreement.
Oil prices reached the peaks of 2019, affected by US production and the outlook for economic slowdown. [O/R]
International Brent futures dropped 0.65% to $ 66.02 per barrel, after peaking at $ 66.83 a barrel earlier this week, supported by supply cuts led by the US. OPEC and US sanctions against Iran and Venezuela.
(Report by Abhinav Ramnarayan, additional report by Hideyuki Sano and Tomo Uetake in TOKYO, edited by John Stonestreet and Gareth Jones)