Asian shares have surged on reports that Donald Trump wants to reach an agreement with Chinese president Xi Jinping about the trade dispute that has dogged markets for months.
The US president spoke to Xi on Thursday and later tweeted that trade talks with China were “moving along nicely” ahead of face-to-face talks between the pair at the G20 summit in Argentina later this month.
Just had a long and very good conversation with President Xi Jinping of China. We talked about many subjects, with a heavy emphasis on Trade. Those discussions are moving along nicely with meetings being scheduled at the G-20 in Argentina. Also had good discussion on North Korea!
— Donald J. Trump (@realDonaldTrump) November 1, 2018
But Bloomberg later reported that the phone call – in which Trump and Xi both expressed optimism about resolving their bitter trade disputes – prompted Trump to ask officials to begin drafting potential terms.
China’s foreign ministry said on Friday that the telephone call between the two leaders was quite positive and that the pair believed they should “enhance trade relations”.
The reports lit a fire under stock markets that have beset by fears of a full-blown trade war between the world’s two biggest economies.
The Nikkei was up 2.5% in Tokyo, the Hang Seng climbed 3.7% in Hong Kong and the Shanghai Composite was up 3.3%. In South Korea, where the export-oriented economy has showed signs of a downturn, the Kospi index had its best day for seven years, jumping 3.5%. The ASX200 in Sydney had already closed up a more modest 0.14% when news of a possible deal came through.
US stock futures rose 0.7% and the FTSE100 is set for a jump of almost 1% when it opens in London on Friday morning. France’s CAC and Germany’s DAX are expected to enjoy similar gains.
In currencies the dollar eased, signalling some relief for emerging markets, while the pound climbed above $1.30.
The US and China’s tit-for-tat tariffs on each other’s goods have rumbled on for months as Trump pledges to help create more US manufacturing jobs. The tariffs have been blamed for a weakening of China’s mighty manufacturing sector which this week showed a marked slowdown in activity.
Trump administration officials have said that trade talks with China cannot resume until Beijing comes up with specific actions it is willing take to meet US demands for sweeping changes to policies on technology transfers, industrial subsidies and market access.
The two countries already have imposed tariffs on hundreds of billions of dollars of each other’s goods and Trump has threatened to slap tariffs on the remainder of China’s $500 billion-plus exports to the United States if the disputes cannot be resolved.
The trade dispute has also forced the yuan to fall in value but on Friday it was stronger for the first time this week, also helped by Xi’s pledge on Thursday of more support for private firms.
Tai Hui at JPMorgan Asset Management said a stabilising trade relationship between US and China and more stimulus from Beijing would be the key ingredients to revive market confidence in Asia.
“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,” he told Bloomberg.