China import deal could boost local markets

CHINA’S agreement to boost imports from the US to close a trade gap between the two countries could see the Australian share market open higher today, as optimism grows over the issue finally being resolved.

The announcement may counter a 30-point fall in futures, or at least signal a market recovery later in the day.

The benchmark S&P/ASX200 index was down 6.9 points, or 0.11 per cent, at 6087.4 points at the close on Friday, while the broader All Ordinaries index fell 6.3 points, or 0.1 per cent, at 6190.9 points.

Today is the 60-day deadline for the US Treasury to finalise any action around the implementation of tariffs on China, which US President Donald Trump considered tripling last month to $US150 billion ($A200 billion) of Chinese goods.

But a joint statement from the White House, released on the weekend after bilateral talks, said the two countries had reached a “consensus on taking effective measures” to reduce the trade deficit and China will “significantly increase” its purchases of US goods and services.

“The tariff trade issue has been worrying markets so much and this statement was actually very positive,” AMP Capital chief economist Shane Oliver said.

“It suggests to me that President Trump will probably at least delay implementation of the tariffs, pending continued constructive discussions and perhaps a conclusion.

“We might actually see a slight rise, we could be up 10 or 15 points simply on optimism that the trade issue is being resolved.”

Other geopolitical issues still worrying markets include the North American Free Trade Agreement negotiations between Mexico, the US and Canada, and a coalition plan from two Italian populist parties concerning their country’s public debt and the European Union.

A rise in global oil prices will trickle down to domestic bowsers in the next fortnight, adding about three cents per litre to already high petrol prices and an average petrol bill that has risen by $13 in two years, Dr Oliver said.

The Australian dollar could also edge back down into 74 cents territory as the US dollar holds strong against a range of currencies, with expectations building around a hike in US interest rates next month.