Stock markets bounce back as China-US trade tensions ease

Equity markets experienced an increase on Monday following conciliatory remarks made by Donald Trump over the weekend, which alleviated concerns regarding China-US trade tensions. Meanwhile, Tokyo stocks soared to an all-time high due to news of an agreement aimed at resolving political instability in Japan.

Investors found reassurance in data indicating that China’s economy expanded in line with expectations during the third quarter, with these gains contributing to the optimistic sentiment from Wall Street, where all three major indexes rebounded from losses incurred on Thursday.

Last week, sentiment was negatively impacted by a new escalation in the trade conflict between Washington and Beijing, as the US president threatened to impose 100 percent tariffs on China in retaliation for its recent restrictions on rare earth exports.

This situation prompted another cycle of retaliatory measures, with Trump cautioning that a scheduled meeting with Chinese President Xi Jinping for the following week might not take place.

However, it seems that tensions have eased over the weekend, as both parties agreed on Saturday to engage in further trade discussions.

Chinese state media reported that Vice Premier He Lifeng and US Treasury Secretary Scott Bessent had conducted "candid, in-depth and constructive exchanges" during a phone call, and both sides consented to initiate a new round of negotiations "as soon as possible".

Just hours prior to the call, Fox News published excerpts from an interview with Trump, in which he stated that he would indeed meet Xi at the APEC summit and remarked that the 100 percent tariff was "not sustainable".

Markets throughout Asia responded positively to the more conciliatory tone, with Hong Kong rising by over two percent and Shanghai also experiencing significant gains as data revealed that China’s economy grew in accordance with expectations during the third quarter, albeit at its slowest rate in a year.

This data was released mere hours before the commencement of a closely monitored four-day meeting in Beijing involving senior Communist Party officials, which is centered on long-term economic planning.

Sydney, Seoul, Wellington, Taipei, Mumbai, Bangkok, and Manila also saw increases, alongside London, Paris, and Frankfurt.

“Catalysed by Trump’s remark… markets appear priced for a positive or at least less-bad outcome,” said Chris Weston at Pepperstone.

“The market’s base case now seems to be that China will offer concessions on its rare-earth export controls, paving the way for the US to extend the current 30 per cent ‘tariff truce’ by another 90 days beyond its 10 November deadline.”

Tokyo led the gains, surging more than three per cent to a new peak, as Japan’s ruling party said it was set to sign a new coalition deal on Monday, paving the way for Sanae Takaichi to become the country’s first woman prime minister.

Stocks were sent into a spin last week when her bid to become premier — having won her party’s leadership earlier in the month — was derailed after its alliance partner withdrew its support.

Investors were encouraged by a rebound in US regional bank stocks on Friday, which had suffered significant losses on Thursday due to announcements from two mid-sized institutions regarding anticipated losses related to troubled loans.

The resurgence on Friday of these banks — Zions Bancorp, located in Salt Lake City, and Western Alliance Bancorporation, based in Phoenix — along with other financial institutions, indicated that investors were becoming less apprehensive about potential systemic issues.


– Key figures at around 0715 GMT –

Tokyo – Nikkei 225: UP 3.4 per cent at 49,185.50 (close)

Hong Kong – Hang Seng Index: UP 2.3 per cent at 25,838.94

Shanghai – Composite: UP 0.6 per cent at 3,863.89 (close)

London – FTSE 100: UP 0.3 per cent at 9,382.39

Euro/dollar: DOWN at $1.1664 from $1.1670 on Friday

Pound/dollar: DOWN at $1.3423 from $1.3433

Dollar/yen: UP at 150.59 yen from 150.50 yen

Euro/pound: DOWN at 86.87 per cent from 86.88 pence

West Texas Intermediate: DOWN 0.9 per cent at $57.01 per barrel

Brent North Sea Crude: DOWN 0.9 per cent at $60.77 per barrel

New York – Dow: UP 0.5 per cent at 46,190.61 (close)