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Markets rally after China, US reach partial trade deal

Markets rally after China, US reach partial trade deal

Business Desk Asian investors on Monday cheered a partial trade deal between China and the United States, sending regional markets rallying, though observers were sceptical about the overall significance of the agreement. Dealers took their lead from a strong performance on Wall Street after top-level negotiators ended two days of talks saying US tariffs due to take effect this week would be put off and China would ramp up its purchases of US farm products. They also agreed on other issues including intellectual property, financial services and currencies. The news provided some much-needed support to Asian markets, with Hong Kong up 0.8 percent and Shanghai jumping more than one percent despite data showing Chinese imports and exports fell more than forecast in September. Sydney and Singapore both put on 0.5 percent, while Taipei and Seoul also rallied more than one percent. Wellington, Mumbai, Manila and Jakarta saw healthy advances. While the deal was welcomed by Trump as “the greatest and biggest deal ever made for our Great Patriot Farmers in the history of our Country”, analysts were a little more guarded. “Let’s not get carried away,” Raoul Leering, head of international trade research at ING Bank NV, told Bloomberg News. “There is a very tough journey ahead for the US and Chinese negotiators to cut a deal that really has substance.” Tai Hui, chief market strategist for Asia at JP Morgan Asset Management, warned that “market optimism may not be well supported by economic reality”. He added: “While we are still waiting on the details on concessions made by both sides, it seems these are still the low-hanging fruits that Beijing has offered in the past. “Some of the more challenging issues, such as the US blacklisting of Chinese tech companies and possible limits on US institutional investors investing in Chinese equities, don’t seem to be on the agenda.” In early European trade, London was down 0.3 percent while Paris and Frankfurt each shed 0.5 percent. On currency markets, the dollar dipped against most higher-yielding, riskier units owing to improved optimism. The pound, however, was suffering selling pressure after European leaders appeared unmoved by a hailed Brexit breakthrough on the Northern Irish question between the leaders of Britain and Ireland. The sterling rallied last week after British Prime Minister Boris Johnson and his Irish counterpart Leo Varadkar said after talks they could see a route towards striking a possible divorce deal. But European officials said Sunday there were still obstacles on how to manage trade and customs between EU member Ireland and Northern Ireland, which is a part of Britain. “Eurozone negotiators and country leaders appear to be underwhelmed by the elaborate detail of the proposed Irish backstop solution,” said Jeffrey Halley, senior market analyst for Asia-Pacific at OANDA. “Like the apparent trade deal that isn’t… precisely no details of the nuts and bolts of Messrs Johnson and Varadkar’s breakthrough conversation of last week have been released.” Oil prices dropped more than one percent after Friday’s more-than-two-percent surge fuelled by a blast on an Iranian tanker as well as news of the mini trade deal. In Mumbai, equity benchmark BSE Sensex rose over 150 points on Monday led by gains in HDFC Bank, ITC and HUL, amid positive global cues and foreign fund inflow. After opening on a volatile note, the 30-share index swung over 200 points in early trade. It was trading 105.79 points, or 0.28 per cent, higher at 38,232.87 at 0945 hours. Similarly, the broader NSE Nifty rose 34 points, or 0.32 per cent, to 11,340.80. Top gainers in the Sensex pack in early session included Tata Motors, Vedanta, Tata Steel, Sun Pharma, Bajaj Auto, IndusInd Bank, Bharti Airtel, HUL and SBI, rising up to 4 per cent. On the other hand, Infosys, PowerGrid, TechM, Kotak Bank and TCS fell up to 3 per cent. In the previous session on Friday, the BSE barometer ended 246.68 points, or 0.65 per cent, higher at 38,127.08, and the Nifty rose 66.70 points, or 0.59 per cent, to 11,301.25. Foreign institutional investors (FIIs) turned net buyers in the capital market, infusing Rs 749.74 crore on Friday, while domestic institutional investors sold shares worth Rs 703.02 crore, data available with stock exchange showed. Domestic equities followed global stocks that rallied after US President Donald Trump announced that US had reached a “very substantial” Phase 1 trade deal with China. Bourses in Shanghai, Hong Kong, Seoul and Tokyo were trading significantly higher. Market sentiment, however, remained volatile amid concerns over an economic slowdown after the World Bank on Sunday said India’s growth rate is projected to fall to 6 per cent after a broad-based deceleration in the initial quarters of this fiscal year, traders said. Markets are also reacting to to industrial output data released Friday evening, they added. Industrial output declined by 1.1 per cent in August due to poor performance by manufacturing, power generation and mining sectors, official data showed. Further, wholesale inflation data is scheduled to come on Monday, which may also influence trading, according to analysts. The rupee, meanwhile, appreciated 19 paise against its previous close to trade at 70.83 in early session. Brent futures, the global oil benchmark, fell 0.51 per cent to USD 60.20 per barrel.

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