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Global stocks jumped Friday, on hopes that trade tensions between the U.S. and China are de-escalating, following a phone call between President Trump and his counterpart, Xi Jinping.
Stocks across Europe advanced in opening trade, following larger rises in Asia, with the Stoxx Europe 600 up 1%. Meanwhile, Japan’s Nikkei Stock Average rose 2.6%, China’s Shenzhen A Share Index gained 3.4% and Hong Kong’s Hang Seng rallied 4.2%.
In the U.S., futures pointed to a 0.8% opening gain for the S&P 500 and a 0.9% uptick for the Dow Jones Industrial Average.
A tweet from Mr. Trump about what he called a “long and very good conversation” with Mr. Xi helped kick off the first leg of the rally in Asia on Friday. Markets climbed further in the early afternoon as investors became more hopeful that an agreement on trade could be reached by the end of the month.
Market gains accelerated after a Bloomberg report said Mr. Trump asked U.S. officials to draft terms of a trade agreement with the Chinese government ahead of a G-20 summit—where the two leaders are expected to meet—at the end of this month.
“While we are still cautious over a full resolution of recent tensions in the medium term, resumption of dialogue between Washington and Beijing would be good enough to investors for now,” said Tai Hui, chief market strategist for Asia at J.P. Morgan Asset Management.
The pickup in markets helped reverse some of the losses from October’s selloff, which was triggered in part by geopolitical tensions.
Markets in Asia have been particularly hit by escalations in trade tensions this year. Equity benchmarks in China, Hong Kong and South Korea have entered bear markets, defined as a 20% fall from a recent high.
President Trump and Chinese President Xi Jinping in Beijing in 2017.
Photo:
Agence France-Presse/Getty Images
In foreign exchange markets, the U.S. dollar dropped below 6.9 to the yuan in offshore markets for the first time since Oct. 12, from as high as 6.98 yuan on Thursday. The Chinese currency has drifted close to 7 per dollar in recent days, a level Beijing has, in the past, sought to defend by intervening in currency markets. A dollar now buys 6.883 yuan.
The WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, was down 0.2% on Friday.
News from China also helped lift Asian markets, according to some analysts, after Mr. Xi met with Chinese business leaders this week. He pledged to reduce their tax burdens and offered financial support to private companies, according to the official Xinhua News Agency.
Beyond the trade dispute, some market tensions have eased in recent days following a series of steady earnings announcements and renewed hope that the U.S. economy isn’t on the verge of a downturn.
“The economic cycle is OK and the selloff in the equities market has meant the valuations are very reasonable,” said William Dinning, head of investment strategy and communication at Waverton Investment Management.
“I don’t think we have any sign of a recession in the U.S.—there may be a bit of a slowdown,” he added.
Investors were also positioning ahead of October employment data expected Friday, with many anticipating that the U.S. Federal Reserve will tighten monetary policy more quickly if inflationary pressures build.
A Wall Street Journal survey of economists forecast the Labor Department will report that 188,000 jobs were added over the month, while unemployment held at 3.7%.
Investors were watching the U.S. technology sector in particular, after Apple posted mixed results following the closing bell on Thursday.
Geoff Yu, head of the U.K. Investment Office at UBS Wealth Management, said last month’s selloff may have been caused by investment in technology groups ramping up particularly steeply in recent months.
The 10-year U.S. Treasury yield drifted up to 3.172%, compared with 3.144% on Thursday. Yields move inversely to prices.
Write to Mike Bird at [email protected]
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