US-China’s Substantial Trade Progress – Asia Market Wrap

US equity-index futures jumped and the dollar rose after China and the US made “substantial progress” on their trade talks, spurring optimism trade tensions will dial down. Gold tumbled 1.4% on easing demand for havens.

A regional stock gauge strengthened 0.7% with the Hang Seng Index advancing for an eighth day, the best run in a year. Contracts for the S&P 500 rose 1.5% and the Nasdaq 100 jumped 2% while those for Europe gained 0.8%. The dollar strengthened against havens like the Swiss franc and yen and outperformed most of its European peers. However, the greenback weakened against the yuan and currencies sensitive to China’s economy like the Aussie and kiwi.

Global bonds retreated with Treasury yields rising across the curve and European debt futures lower. Shares in India gained 3% and those in Pakistan leaped 9% after the two countries agreed to an immediate ceasefire.

While stocks have rallied recently – the S&P 500 Index has almost risen back to where it was prior to President Donald Trump’s announcement of reciprocal tariffs in early April – further gains will depend on the de-escalation of the trade war between the US and China. The fear is that unless reversed, tit-for-tat tariffs risk dealing a stagflationary blow to global economies by driving them into recession while boosting inflation at the same time.