Asia: Markets extend global rally as Trump fuels trade deal hope

[HONG KONG] Asian markets rallied on Wednesday after Donald Trump hailed "very good" phone talks with Xi Jinping and said the two would meet at the G-20 next week, renewing hopes of a deal to end a painful China-US trade war that has jolted the global economy.

The US president's comments provided a much needed boost to investors after a month of volatility sparked by his shock decision to hit China with fresh tariffs, ending months of apparently positive negotiations.

Adding to the upbeat mood were comments from the European Central Bank head Mario Draghi hinting at a cut in interest rates to support the stuttering eurozone economy.

Also, the Federal Reserve is due to end its latest policy meeting later Wednesday, with dealers hoping for some idea about its own plans for rates.

After all three of Wall Street's main indexes posted gains of one per cent or more, Asia picked up the baton, with Hong Kong piling on more than two per cent, Tokyo 1.7 per cent, Shanghai and Singapore 1.4 per cent, and Sydney one per cent.

Taipei, Wellington and Seoul were also more than one per cent higher.

The rally was sparked after Mr Trump tweeted: "Had a very good telephone conversation with President Xi of China. We will be having an extended meeting next week at the G-20 in Japan. Our respective teams will begin talks prior to our meeting."

Later he told reporters "the meeting might very well go well", adding the China wanted to make a deal.

"China and the US will both gain by cooperating and lose by fighting," Mr Xi told Mr Trump, according to a readout by Chinese state broadcaster CCTV.

'STRONG INCENTIVE'

Mr Trump's tweet followed weeks of speculation about whether the heads of the two most powerful economies would actually meet on the sidelines of the G-20 in Osaka. Mr Trump had warned that if Mr Xi did not turn up he would hike tariffs on virtually all China's exports to the US.

However, analysts pointed out that it was in both leaders' interests to bring an end to the long-running dispute.

"There is strong incentive for both presidents to re-engage," said Tai Hui, chief market strategist for Asia-Pacific at JP Morgan Asset Management.

"Trump is kick-starting his (re-election) campaign and he will need strong economic performance over the next 18 months. President Xi will also need trade tension to cool down to support China's domestic economy, while pursuing financial market liberalisation."

The optimism underpinned a rally in riskier assets, with high-yielding currencies benefiting. South Korea's won jumped 0.7 per cent, the South African rand added 0.8 per cent and Indonesia's rupiah gained 0.5 per cent.

The Chinese yuan, which has struggled in recent weeks, climbed 0.4 per cent.

The euro, however, extended Tuesday's losses after Mr Draghi's remarks that weak growth and soft inflation could lead to further rate cuts to historic lows.

He also batted off an accusation from Trump of currency manipulation, saying the ECB's mandate "is price stability".

Oil prices also pushed ahead after surging on hopes that a resolution to the trade war would boost demand for the commodity. Brent climbed almost two per cent and WTI almost four per cent on Tuesday.

AFP