[HONG KONG] Asian stocks rallied on Monday (May 12) after top Chinese and US officials held “substantial” trade talks at the weekend, fuelling hopes the two sides will dial down a tariff standoff that has rattled global markets and fuelled recession fears.
Investors have been on a roller-coaster ride since US President Donald Trump unveiled eye-watering tolls on trading partners on Apr 2, with the heftiest saved for Beijing, raising concerns of a trade war between the economic superpowers.
The US president eventually hiked the measures against China to 145 per cent, which were met with retaliatory rates of 125 per cent.
However, there have been signs of an easing of tensions and after two days of highly anticipated negotiations in Geneva, the two countries hailed progress towards ending the crisis.
US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer met Chinese Vice-Premier He Lifeng and international trade representative Li Chenggang in the first known talks since Trump’s “Liberation Day” announcement.
“We’ve made substantial progress between the United States and China in the very important trade talks,” Bessent told reporters, while the White House hailed what it called a new “trade deal”, without providing any additional details.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
China’s He said the atmosphere in the talks was “candid, in-depth and constructive”, adding that they were “an important first step”.
Greer added that “differences were not as large as maybe thought”.
The two sides said they would provide details on Monday.
World Trade Organization chief Ngozi Okono-Iweala said after her own meeting with He that the talks with the United States “mark a significant step forward and, we hope, bode well for the future”.
Before the discussions, Trump had indicated he might lower his tariffs, writing on social media that an “80 per cent tariff on China seems right!”
Asian markets started the week on a strong note, with Hong Kong up more than 1 per cent, while Shanghai also enjoyed healthy buying interest.
Sydney, Seoul, Taipei and Wellington were all in the green, with Tokyo flat.
US futures surged more than 1 per cent.
The US dollar also rose, as did oil prices owing to speculation easing tensions would help demand. Gold, which rallied last month over a rush to safe havens, extended losses.
“The initial reaction to the weekend US-China talks (is) predictably encouraging,” said Chris Weston at Pepperstone.
“While this was always the likely outcome, it does represent an important step forward in the dialogue process and is obviously constructive, and we now look for the necessary substance and whether the two countries will take the tangible step towards the speculated US import tariff rates of 60 per cent.”
However, he warned traders “will have a low tolerance for inaction – market players want the tariff rates taken down to 60 per cent swiftly and in one action”.
Karsten Junius at Bank J Safra Sarasin was also cautious.
“We expect financial markets to remain volatile over the coming months, as they have almost fully priced out negative economic surprises and could once again be disrupted by more serious obstacles in trade negotiations,” he said in a commentary.
“In all likelihood, things may still get worse before they get better.”
Investors are also awaiting the release this week of data on US inflation and retail sales, which will provide a fresh snapshot of the world’s biggest economy since the tariffs were unveiled. AFP
