China-US trade war ‘on hold’: What it means for global stock, bond, currency markets

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Published: May 21, 2018 10:02:50 AM

On the news of the US and China, the world’s two largest economic powers, agreeing to put trade war ‘on hold’, American stock markets jumped on Monday.

us, us stocks, us stock market, economyThe positive mood in the US stock markets may spillover to the Asian markets as well.

On the news of the world’s two largest economic powers agreeing to put trade war ‘on hold’, the US stock markets jumped on Monday. Both US and China announced that the two countries are working on a wider trade agreement in the meantime. S&P mini futures rose 0.6 percent in early Asian trade on Monday while US 10-year Treasuries futures price fell 4.5/32, or 0.12 percent. “The weekend talk appears to have made progress. While they still need to work out details of a wider trade deal, it is positive for markets that they struck a truce,” Reuters reported citing Koji Kabeya, chief global strategist at Daiwa Securities.

Asian stocks

The positive mood in the US stock markets may spillover to the Asian markets as well, which have been limited by worries arising due to trade war Trump proposed tariffs on steel and aluminium products at the start of the year.

Bond and currency market

The US bond yields are likely to gain as safe-haven demand for bonds falls, with the 10-year Treasuries yield seen testing its seven-year high of 3.128 percent hit on Friday, Reuters reported. In the currency market, higher US yields helped to strengthen the dollar against a wide range of currencies.

The agreement that was reached on Saturday by Chinese and American negotiators established a framework for addressing future trade imbalances.

“The trade talks over the weekend suggest that real trade-war outcomes are very unlikely,” Robert Mead, co-head of Asia-Pacific at Pacific Investment Management Co., told Bloomberg. “This seems to suggest that global trade stays healthy — we don’t have to worry too much about that.” The dollar rally “probably has a bit further to go,” Mead said,

Oil prices

China and the United States news of putting looming trade war between the world’s two biggest economies “on hold”. Brent crude futures were at $78.87 per barrel at 0045 GMT, up 36 cents, or 0.5 percent, from their last close.

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