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Trade War Fears Diminish as China Shows Sustainability

Trade War Fears Diminish as Shows Sustainability

Asian stocks made modest gains Wednesday, after a batch of generally solid US earnings and news of ’s stimulus plans helped drive markets up.

Beijing on Tuesday signalled that it would shift to a looser fiscal policy in a bid to protect the world’s second largest economy from the impact of an escalating trade row with Washington.

The announcement sent Shanghai’s main stock index up 1.6 percent on Tuesday, while the yuan hit a 13-month low versus the US dollar.

“Markets decided it was uber bullish news for Chinese stocks, metals and industrial commodities, mining stocks”, said Greg McKenna, chief market strategist at AxiTrader.

London-listed mining companies including BHP Billiton, Rio Tinto, and Glencore all gained around five percent on Tuesday on the expectation that they would benefit from higher Chinese demand for metals.

Shanghai’s rally stalled Wednesday, with the market dropping 0.2 percent. But and Singapore climbed 0.7 percent while Tokyo rose 0.5 percent.

The mixed movements in markets came as analysts warned that investors were still weighing the implications of the spat between Washington and its main trading partners including China and the European Union.

In addition to slapping hefty import taxes on steel and aluminium from the EU, Canada and Mexico, has imposed 25 percent tariffs on $34 billion of Chinese products, drawing a retaliatory response.

Washington has since threatened tariffs on another $200 billion in Chinese goods.

– ‘Tariffs are the greatest!’ –

“While investors remain upbeat about earnings and the US economy, it’s increasingly challenging to stay optimistic given all the negative geopolitical news flows all the while staring at the possibility of US follow-through with another 200 billion (in) tariffs late August,” said Stephen Innes, head of Asia-Pacific trading at Oanda trading group.

“The price of US soybeans, meanwhile, has dropped roughly 20 per cent since announced his first round of tariffs in March,” Innes added.

In what appeared to be the first acknowledgement that Trump’s aggressive trade strategy was hurting ordinary Americans, the US government on Tuesday announced $12 billion in aid for farmers who have been the primary targets of retaliatory measures.

But the US leader showed no sign of backing down on his approach, tweeting: “Tariffs are the greatest!”

With European Commission President Jean-Claude Juncker on his way to Washington on Wednesday to meet Trump in a bid to prevent an escalation of tariffs, the US president tweeted: “Countries that have treated us unfairly on trade for years are all coming to Washington to negotiate.”