Stock Prices Surge on Bullish Talk on China-U.S. Trade Deal

A man cleans up an electronic stock board of a securities firm in Tokyo, Friday. (AP Photo/Koji Sasahara)

Shares were mixed in Asia on Friday after White House officials said China and the U.S. were getting close to an agreement to cool tensions over trade.

Markets have swung from euphoria to alarm as officials in Beijing and Washington offered conflicting opinions about the state of the negotiations over ending a tariff war between the two largest economies.

On Thursday, Assistant to the President for Trade and Manufacturing Policy Peter Navarro said in comments to Fox that the two sides were “on a glide path” toward agreement.

“We’re going to get a great deal,” he said when asked about comments by Chinese officials who said Beijing expects the U.S. side to gradually roll back some of the billions of dollars’ worth of tariffs imposed on Chinese exports by President Donald Trump in an effort to get China to change its trade and technology policies.

Trump’s economic advisor, Larry Kudlow, likewise reportedly said Thursday the two sides were close to a deal.

That was good enough for investors gauging the prevailing winds a month after the two sides announced they were working on a Phase 1 agreement that would be followed by more complex negotiations.

Japan’s Nikkei 225 rose 0.7% to 23,303.23 and the Kospi in South Korea added 1.1% to 2,162.18. Hong Kong’s Hang Seng picked up 0.2% to 26,361.41, while the Shanghai Composite index lost 0.4% to 2,898.79.

Australia’s S&P ASX 200 advanced 0.9% to 6,793.70, while the Sensex in India jumped 0.6% to 40,518.75. Shares rose in Taiwan, Singapore and Jakarta but fell in Bangkok and Kuala Lumpur.

The broader market has been gaining ground for weeks on hopes that the U.S. and China can make progress in their latest push for a deal. Investors have also been encouraged by surprisingly good corporate earnings and data showing the economy is still growing solidly.

The Federal Reserve has helped, lowering interest rates three times this year. The central bank has signaled that it’s done lowering rates, for now, unless the U.S. economy shows any major signs of trouble.

Investors hope that Washington and Beijing will reach an agreement to avert new and potentially more damaging tariffs that are scheduled to take effect in the middle of next month. They would hit some popular consumer products, such as electronic devices. Trump dismissed making any changes to tariffs while negotiations continue.

“Trump wants good news to help the economy hold up ahead of the Presidential election and to offset the impeachment. Going through with the scheduled December 15 tariff hike on a range of consumer goods would be shooting himself in the foot,” Shane Oliver of AMP Capital said in a commentary.

“Given the ongoing slowing in the Chinese economy and its need for some US agricultural products it makes sense for it to cut a deal now,” he said. “Finally, comments by Larry Kudlow that ‘we’re getting close’ and ‘the mood music is pretty good’ suggests a Phase One deal may actually be getting close,” he said.

In a goodwill gesture of sorts, on Thursday China lifted a 4-year ban on U.S. poultry products. That buoyed processed food companies like Tyson Foods, which gained 1.7%. Sanderson Farms gained 3.7% and Pilgrim’s Pride added 1.1%.

The U.S. is the world’s second largest poultry exporter, with global exports of poultry meat and products of $4.3 billion last year. The U.S. Department of Agriculture estimates that more than $1 billion in poultry could be exported to China annually.

Benchmark crude oil gained 20 cents to $56.97 per barrel in electronic trading on the New York Mercantile Exchange. It fell 35 cents to settle at $56.77 a barrel.

Brent crude oil, the international standard, picked up 17 cents to $62.45 a barrel.

The dollar rose to 108.58 Japanese yen from 108.42 yen on Thursday. The euro strengthened to $1.1025 from $1.1022.

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