Stocks advanced, China’s renminbi gained ground and crude oil rebounded on Monday, buoyed by renewed hopes of a US-China trade deal after the leaders of the world’s two biggest economies agreed to resume negotiations following weeks of trepidation across global markets.

China’s CSI 300 index of major Shanghai and Shenzhen-listed stocks rallied 2.5 per cent in morning trading, and S&P 500 futures tipped US stocks to open up 0.8 per cent.

That followed a meeting by US President Donald Trump and his Chinese counterpart Xi Jinping on the sidelines of the G20 meeting in Osaka on Saturday, where Mr Trump pledging not to introduce more tariffs on Chinese goods and softened his stance on telecoms maker Huawei.

“Expectations were quite low running into G20, that’s why the weekend’s developments are still providing some lift,” said Frances Cheung, head of Asia macro strategy at Westpac.

Haven assets lost some lustre, with gold falling 1.2 per cent and the Japanese yen shedding 0.5 per cent to ¥108.38 against the US dollar. The yield on 10-year US Treasuries, which moves inversely to prices, rose by 3 basis points.

But Ms Cheung warned that a trade deal resolving the longstanding tension between the US and China remained elusive, and that recent economic indicators — particularly from Taiwan, which is heavily exposed to Chinese trade — were still weak.

“The risk rally is understandable”, Ms Cheung said, “but it doesn’t change the growth outlook.”

Andrew Milligan, head of global strategy at Aberdeen Standard Investments, said businesses and investors would be reassured to some extent by the weekend truce, which included the US allowing Huawei to continue doing business with some US companies and China agreeing to buy more agricultural goods from the US.

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“The devil will be in the detail, of course,” Mr Milligan said. “On the downside, a Damocles sword continues to hang over the markets. Trump has indicated that he is no hurry to finish a deal, and Huawei remains on a short rope as permission to operate in the US could be withdrawn at any time.”

On Monday, market participants were content to ignore potential storm clouds still on the horizon, piling back into equities across the Asia-Pacific region. Tokyo’s benchmark Topix index gained 1.7 per cent and Sydney’s S&P/ASX 200 rose 0.5 per cent. Markets in Hong Kong were closed for a public holiday.

The Chinese renminbi pulled away from the 7-per-dollar mark, with the onshore rate — which is permitted to move 2 per cent in either direction of a daily midpoint set by the central bank — rising as much as 0.4 per cent to Rmb6.837 per dollar while the more lightly controlled offshore rate strengthened 0.7 per cent to a seven-week high of Rmb6.817.

Traders had expected the Chinese currency to weaken past the Rmb7 mark if talks broke down at the G20 summit.

Oil prices climbed, boosted by brighter prospects for global trade as well as an extension of production cuts by the so-called Opec+ group since 2016, which includes countries that are not part of the oil producing cartel.

Brent crude oil, the global benchmark, advanced 2.1 per cent to $59.67 a barrel.

Additional reporting by Siddarth Shrikanth in Hong Kong



Via Financial Times