U.S. and European stocks jumped, the dollar strengthened and Treasury prices rose on Tuesday after the United States said it would delay tariffs on some Chinese products, easing concerns that a protracted trade war would harm global growth.
The Trump administration will delay imposing a 10% tariff on certain Chinese goods, including laptops and cell phones, that had been scheduled to start next month, the Office of the U.S. Trade Representative said.
Equity, debt and currency markets sharply reversed course minutes after Wall Street opened for trade on news from Hong Kong about a call Chinese Vice Premier Liu He held with U.S. officials, according to China’s Commerce Ministry.
Liu spoke with U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin on Tuesday evening, a ministry statement said.
Shares of Apple Inc, which makes iPhones and MacBooks in China, rose almost 5%.
“The news today is obviously good news. Risk appetite has improved drastically,” said Candice Bangsund, a portfolio manager and global asset allocation strategist at Fiera Capital in Montreal.
“The last few weeks have been dominated by a reduced appetite in risk. Investor fragility and sentiment have been rattled by all of these macro events,” she said, referring to unrest in Hong Kong, Italy and the peso crash in Argentina.
A global re-acceleration of growth should occur later this year as major central banks cut interest rates and recent economic data proves better than where markets have traded, Bangsund said.
The benchmark S&P 500 index rose more than 1.5% and the Nasdaq almost 2% on the news. Major stock bourses in Europe also rose, with the Euro STOXX index of eurozone shares closing 0.92% higher.
Major equity indices had tumbled roughly 5% since late July on growing concerns the ongoing U.S.-Chinese trade spat would slam global growth and fester unresolved until after U.S. presidential elections in November 2020.
Markets also had been lower, with gold earlier hitting a more than six-year high, as the unrest in Hong Kong and a rout in the Argentine peso drove investors already unnerved by the trade war into havens such as bullion, bonds and the yen.
The yen benefits in moments of geopolitical uncertainty and during economic downturns. The U.S. dollar rose 1.22% to 106.56 yen per dollar.
Frontpage August 22, 2019