Wall Street smiles for US-China Trade War truce

A truce in the U.S.-China trade war boosted global stocks to their highest in roughly three weeks on Monday, while sending the U.S. dollar lower and the Chinese yuan and several trade-dependent currencies higher.

The rally in equities follows an agreement between Washington and Beijing at the G20 summit in Argentina on Saturday that calls for a 90-day trade tariff truce. Oil prices jumped more than 3 per cent.

“Today is mostly about celebrating the fact that the U.S. and China have delayed what could have been the some of the worst-case scenarios regarding their trade relations,” said Michael Arone, chief investment strategist at State Street Global Advisors.

Wall Street’s major indexes rallied on Monday following a truce between the United States and China in their trade war, which has clouded the outlook for the stock market for much of the year.

The Dow Jones Industrial Average rose 287.97 points, or 1.13 per cent, to 25,826.43, the S&P 500 gained 26.05 points, or 0.94 per cent, to 2,786.22 and the Nasdaq Composite added 99.26 points, or 1.35 per cent, to 7,429.79.

he pan-European STOXX 600 index rose 1.03 per cent.

U.S. President Donald Trump said China has agreed to “reduce and remove” tariffs below the 40 percent level currently charged on U.S.-made vehicles. That helped boost shares of European automakers more than 3 percent.

The White House also said the existing 10-per-cent tariffs on $200-billion worth of Chinese goods would be increased to 25 percent if no deal was reached within 90 days.

“The G20, the dinner in particular, has ignited quite a robust risk rally and that’s coming at the dollar’s expense,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

U.S. Treasury yields rose after the U.S.-China deal boosted stocks and reduced demand for safe-haven U.S. debt, but they reversed course at midday as risk appetite faded.

China and the United States agreed during a weekend meeting in Argentina of the Group of 20 leading economies not to impose additional trade tariffs for at least 90 days while they hold talks to resolve existing disputes.

The trade war between the world’s two biggest economies has weighed heavily on global trade and sparked concerns of an economic slowdown.

Crude oil has not been included in the list of products facing import tariffs, but traders said the positive sentiment was supporting crude markets.

“Initial signs of the U.S.-China trade relation on the mend have provided a boost to oil prices in today’s trading session. Nevertheless, whether the momentum will sustain hinges on tangible outcomes from the negotiations,” said Abhishek Kumar, senior energy analyst at Interfax Energy in London.

The Organization of the Petroleum Exporting Countries meets on Thursday to decide output. The group, along with non-OPEC member Russia, is expected to announce cuts aimed at reining in a glut that has pulled down crude prices by around a third since October.