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US-China trade war keeps markets on their toes

US-China trade war keeps markets on their toes

Business Desk Uncertainty about the fate of the trade negotiations between the United States and China kept markets on their toes on Friday, with European stocks benchmarks mimicking their Asian peers and retreating from the previous session’s highs, reports Reuters. Overnight on Wall Street, the Dow and S&P 500 reached record closing highs on hopes of a truce to end the damaging tariff war but a Reuters report that the White House opposed aspects of a tentative deal limited the day’s gains. The pan-European STOXX 600 opened down 0.4 per cent at 405 points, 10 ticks from its April 2015 record of 415. S&P 500 futures retreated 0.1 per cent after the New York benchmark hit its highest closing level ever on Thursday. “The trade deal is the predominant driver”, for markets at the moment said Lars Kreckel, global equity strategist at Legal & General Investment Management, noting that this morning dip in market was a just knee-jerk reaction to the latest news on the US-China front. The mood contrasts with Thursday’s surge of optimism in global markets on news Beijing and Washington had agreed to roll back tariffs as part of a first phase of a trade deal. Worries the pact could fall apart are now prompting some investors to sell heading into the weekend. Chris Jeffery, head of rates and inflation at the British financial service group said the “background music” to the trade row, a Federal reserve easing monetary policy and macroeconomic indicators stabilising had helped the recent rally. Germany’s DAX, a gauge of investors’ sentiment on trade, moved in synchronicity with the rest of the market and eased 0.4 per cent. German exports posted their biggest rise in almost two years in September, data showed on Friday, providing some relief amid widespread concern that Europe’s largest economy will dip into recession in the third quarter. “Market participants are getting increasingly ‘long’ on good news”, said Stephen Gallo, European head of FX strategy at Canadian bank BMO. “The ‘payback’ in risk assets for a very downbeat picture earlier in the year looks unstoppable at the moment”, he added. In the meantime, crude oil futures fell amid lingering uncertainty over the long-awaited deal and rising crude inventories in the United States. Brent crude, the global benchmark, was down 16 cents, or 0.3 per cent, at $62.13 a barrel by 0259 GMT, after gaining 0.9 per cent in the previous session. US West Texas Intermediate (WTI) crude CLc1 was down 56 cents, or 0.9 per cent, at $61.73 a barrel. The contract rose 1.4 per cent on Thursday. Safe haven gold, which tends to rise during times of uncertainty, was a tad firmer, up 0.1 per cent at $1,469.4 per ounce, having hit a five-week low of $1.460.7 on Thursday. Moves in the currency market were restrained. The dollar was treading water at 109.32 yen, after reaching a five-month high of 109.49 the previous day. The euro was steady at $1.1050 as was the dollar index unchanged at 98.154 after hitting three-week highs of 98.236 on Thursday. Asian and European markets fell on Friday at the end of a healthy week, with uncertainty surrounding the China-US trade talks following China’s announcement of a plan with Washington to roll back tariffs. News out of Beijing that it had agreed a deal with Washington to start removing levies if negotiations progress fired a rally in late business on Thursday, and helped the Dow and S&P 500 to more records. The announcement fanned hopes the world’s economic superpowers — who are currently finalising a mini trade pact as part of a wider deal — can resolve their long-running tariffs war that has hobbled the global growth outlook. It also eased worries about the negotiations caused by reports that a hoped-for signing ceremony this month between Donald Trump and Xi Jinping could be delayed until December. “The elevation of discussion from a trade truce to a possible tariff rollback is important and suggests both China and the US have come under pressure to seal a deal,” National Australia Bank’s Tapas Strickland said in a note. White House spokeswoman Stephanie Grisham told the Fox News Channel: “I cannot get ahead of the talks with China, but we are very, very optimistic that we will reach a deal soon.” However, a report said there was some opposition within the administration to such a move. And Trump trade adviser and China hawk Peter Navarro told Fox Business “there is no agreement at this time to remove any of the existing tariffs as a condition of the phase one deal. The only person who can make that decision is Donald Trump”. Neil Wilson, chief market analyst at Markets.com, said: “There a strong sense of the ‘if’ about this. If a first phase trade deal is done, there is agreement to roll back some existing tariffs, but only if the deal is agreed. Usual story — mixed reports really all just noise.” Adding to the malaise was a certain amount of profit-taking after another strong week across equity markets, which have been on a rally since last month as the trade talks showed progress. Hong Kong fell 0.7 percent following a six-day advance, while dealers in the city were bracing for a fresh weekend of protests after the death of a student who sustained head injuries when he fell during clashes with police. Shanghai gave up 0.5 percent after data showed Chinese exports and imports fell again last month, though not as quickly as expected, while Singapore was off 0.9 percent and Seoul retreated 0.3 percent. Taipei lost 0.2 percent, Manila was down 0.7 percent and Jakarta gave up 0.1 percent. Mumbai fell 0.2 percent and India’s rupee sank 0.5 percent after Moody’s lowered its ratings outlook on the country’s debt. In early trade, London and Frankfurt dipped 0.4 percent, while Paris slipped 0.3 percent. The pound remained subdued after taking a hit on Thursday from an economic growth downgrade for 2020 by the Bank of England that fuelled speculation it could cut interest rates soon. The central bank kept rates on hold but the decision was split for the first time in more than a year, with two dissenters calling for a reduction in borrowing costs to fend off the feared downturn.

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