Asian shares, oil soar on Sino-US trade truce

Asian shares rallied on Monday after US and Chinese leaders brokered a truce in their trade conflict, a relief for the global economic outlook and a tonic for emerging markets and battered oil prices.

Trade-exposed currencies led the early gains, with the Australian dollar notching a four-month peak, while the dollar dropped to one-month lows against the yuan.

China's CSI300 index of Shanghai and Shenzhen shares rose 2.6 per cent. In Japan, the Nikkei gained 1.3 per cent to a six-week high.

"Markets are opening with a knee-jerk boost to risk appetite but time will tell how enduring the optimism proves to be," said ANZ economist Jo Masters. "There are already very different official takes on what was achieved at the meeting."

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“But for now, both sides can claim a win,” she added. “Perhaps not insignificantly, it provides a window to export the soybean crop from key Republican states, at least.”

China and the United States agreed to halt additional tariffs in a deal that keeps their trade war from escalating as the two sides try again to bridge their differences with fresh talks aimed at reaching a deal within 90 days.

The White House said on Saturday that president Donald Trump told Chinese president Xi Jinping during high-stakes talks in Argentina that he would not boost tariffs on $200 billion of Chinese goods to 25 per cent on January 1st as previously announced.

"Deeply contentious thornier structural issues such as forced technology transfer remain unresolved," cautioned Westpac FX analyst Robert Rennie.

“This US-China agreement is thus better characterised as a ‘mini-breakthrough’ that puts a momentary pause on trade tensions rather than a comprehensive policy deal.”

Differences

Indeed, many market players doubt the two countries can bridge their differences that cover a range of issues within three months.

"Technology is becoming the main battle ground. It's not just a trade war any more. It's more like a technology war, in which we just found a temporary lull," said Hiroshi Watanabe, economist at Sony Financial.

And on the whole, there is still uncertainty over the outlook for corporate earnings amid signs of slowing growth.

The dollar had come under pressure last week when comments by Federal Reserve chairman Jerome Powell were interpreted by markets as hinting at a slower pace of rate hikes.

Mr Powell was scheduled to testify on Wednesday to a congressional Joint Economic Committee. But the hearing is expected to be postponed to Thursday because major exchanges will be closed on Wednesday in honour of former US President George HW Bush, who died on Saturday at the age of 94.

Oil soared more than five per cent, a positive start after it had posted its weakest month in more than 10 years in November, losing more than 20 per cent as global supply outstripped demand.

Speculation is high the Organization of the Petroleum Exporting Countries (OPEC) and Russia would agree some form of production cut at a meeting in Vienna on Thursday. – Reuters