Asian stocks showed their best performance in almost eight months on Monday, weeks after the US and China agreed on preliminary trade arrangements.
Separately, a “lower-than-expected” Australian budget has likewise “built expectations by markets for further easing from the Reserve Bank (of Australia)", per Ryan Felsman, senior economist at CommSec in Sydney, who noted that the trade deal and the diminished risk of a no-deal Brexit after the Tories’ win in the UK snap vote backed the bullish sentiment in Australia.
Chinese investors started Monday with arguably lukewarm expectations, with the CSI300 index climbing 0.3% higher by the afternoon, while the country’s industrial output and retail enjoyed a near two percent increase on Friday.
In Japan, although its Nikkei 225 has now fallen 0.29 percent, had earlier surged 2.55 percent to a 14-month high on Friday.
The lengthy trade row between the world’s two biggest economies is viewed to have impacted world economic growth:
“The announcement is a step in the right direction for the two nations, but does not completely reduce the chances of trade disputes between the two nations in the year", ANZ analysts said in a note cited by Reuters.
Although the preliminary deal prompted weary and cautious analysts to set their eyes on the next stage, the news of the deal was enough to send the S&P 500 to a record closing high of 3,168.8, up 0.01%. The Nasdaq Composite added 0.2% to end the day at 8,734.88, also a record, and the Dow Jones Industrial Average rose 0.01% to 28,135.38.
US Treasury yields also showed an upward trend on Monday, reflecting positive expectations from the trade deal. For instance, Benchmark 10-year Treasury notes went up to 1.8365% compared with their close of 1.821% on Friday.
The dollar was likewise up, along with the euro and sterling, with the latter leaping last week after the UK election: it fanned a 0.48 percent growth to $1.3389.
The “phase one” agreement between the US and China suspended an earlier declared round of US tariffs on a $160 billion list of Chinese goods originally due to take effect on Sunday.
In addition, the United States agreed to halve the duty rate to 7.5% on $120 billion in Chinese goods.