[HONG KONG] Most Asian stocks extended gains on Tuesday as investors continued to bask in the glow of the China-US tariff suspension that has fuelled hopes the world’s two economic superpowers will step back from a punishing trade war.
Equity markets across the world rallied with oil and the dollar on Monday after the two sides said they would slash most of their eye-watering tit-for-tat levies and hold talks to end a standoff that has stoked recession fears.
The news raised hopes that deals can be done with Washington to cut or even remove some of the tolls unveiled by Donald Trump on his “Liberation Day” on April 2 that sent shivers through trading floors and raised concerns about the global trading system.
Top-level negotiators said after two days of talks in Geneva at the weekend that the United States would reduce its 145 per cent duties on China to 30 per cent for 90 days, while Beijing would cut its retaliatory measures to 10 per cent from 125 per cent.
The US president described the move as a “total reset” and said talks with counterpart Xi Jinping could soon follow, while US Treasury Secretary Scott Bessent told CNBC he expected officials would meet again in the coming weeks to reach “a more fulsome agreement”.
After piling higher on the news on Monday, most of Asia’s markets started Tuesday on the front foot. Tokyo was up more than one per cent with Taipei, while Shanghai, Sydney, Singapore, Seoul, Wellington and Manila were also well up.
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However, Hong Kong dropped more than one per cent, having surged three per cent the day before.
Oil prices and the dollar also pulled back from the previous day’s rally.
The broad gains in Asia came after Wall Street greeted the announcement with open arms.
The tech-heavy Nasdaq rocketed more than four per cent, the S&P 500 jumped 3.3 per cent and the Dow 2.8 per cent, while a gauge of US-listed Chinese stocks surged more than five per cent.
“Clearly, US-China trade talks have yielded much faster success than many had expected,” strategists at HSBC wrote in a note.
“There’s very clearly upside risk for the broader risk asset spectrum now as markets will likely extrapolate a higher likelihood of further deals in the coming weeks.”
However, nervousness remains.
The HSBC strategists added: “These may not move in a straight line. Things could easily turn out a bit bumpier in future trade negotiations.”
And IG chief market analyst said the talks show “both sides are aware of the need to repair their relationship, and avoid further damage from the imposition of such huge tariffs”.
“But even at the pause levels of 10 per cent and 30 per cent, these tariffs are still much higher than anything imagined by investors just a few months ago.
“It is not quite six weeks since these tariffs were introduced — the impact has yet to really appear in both economic data and company earnings. The full impact will only become clear with time.”
Meanwhile, Federal Reserve governor Adriana Kugler warned that even with the reduction in tariffs, Trump’s trade policies will likely push inflation higher and weigh on economic growth. AFP
