Markets rebound on easing trade war fears
LONDON: World stock markets roared higher yesterday as fears eased over US President Donald Trump’s planned trade tariffs and over tension in the Korean peninsula, dealers said. European indices rose as investors bet that Trump would not push through with extreme protectionist policies, and stocks in big European carmakers were the main beneficiaries of the relief rally.
“Stocks bounce despite trade war concerns,” Craig Erlam, senior market analyst at OANDA said, while Jasper Lawler at London Capital Group said that “riskon trading” was making a return.
Wall Street opened higher, building on the previous day’s gains. Asia surged earlier as shock over the controversial tariffs announcement gave way to hope that Trump may not have the full backing of his Republican party on this move.
According to Lawler, the impact of Trump’s announcement may have been dampened “thanks to relatively little interest by China in retaliating against the US”. Markets were also buoyed by an announcement from Seoul that the leaders of North and South Korea will hold a historic summit in the Demilitarized Zone next month after Pyongyang expressed willingness to give up its nuclear weapons.
“Risk appetite has improved on headlines North Korea has expressed a willingness to talk about denuclearization, according to South Korea,” analyst Fawad Razaqzada of Forex said.
Lukman Otunuga, research analyst at FXTM, described as “remarkable and somewhat alarming how the risk-off sentiment last Friday was swiftly replaced with a risk-on mood today”.
“European stocks were elevated by the renewed appetite for risk,” he added. Republican Trump had sparked fears of a global trade war late last week when he unveiled plans to slap levies on imports of steel and aluminium, sending share prices tumbling.
Automakers accelerate
European automakers revved higher, after losing speed on worries that a trade war could hurt valuable exports into the United States. In Frankfurt, carmakers Volkswagen and Daimler jumped by more than three percent and 1.4 percent respectively.
“A strategic target-and standing to lose the most from any possible trade war-the German auto sector is rebounding sharply, helping lift the DAX higher,” noted Interactive Investor analyst Rebecca O’Keeffe.
In Paris, Renault and Peugeot were also sharply higher. And Milan’s benchmark FTSE MIB shares index wiped out the previous day’s losses seen after Italy’s inconclusive election outcome, and added hefty gains, outperforming its European peers.
Tokyo stocks snapped a four-day losing streak yesterday, boosted by a rebound on Wall Street and a fall in the yen’s value against the dollar. The benchmark Nikkei 225 index climbed 1.79 percent or 375.67 points to 21,417.76 while the broader Topix index was up 1.27 percent or 21.51 points at 1,716.30.
“It’s buybacks that boosted the market today,” said Makoto Sengoku, market analyst at Tokai Tokyo Research Centre. “US stocks rebounded and the (dollar) rate bounced back into the 106 yen range,” improving investor sentiment, he said. But investors were unwilling to go on a major buying spree ahead of key US jobs data on Friday, he added. All three major indices on Wall Street rose on Monday, with investors seemingly persuaded President Donald Trump’s recent threats to launch a trade war were actually a bargaining tactic.
The president on Monday indicated he might consider exempting Canada and Mexico from steel and alumnium import tariffs if he likes the outcome of pending trade talks. The yen stayed weak after falling on Monday, with the dollar trading at 106.19 yen yesterday against 106.18 yen in New York on Monday afternoon and the 105-yen range in Tokyo earlier.
A lower yen is positive for Japanese exporters as it makes exported goods cheaper and inflates overseas profits when repatriated. Carmakers were broadly higher. Honda jumped 1.60 percent to 3,666 yen and Toyota rose 0.99 percent to 6,882 yen. Steelmakers also bounced back with Nippon Steel and Sumitomo Metal rising 0.96 percent to 2,399.5 yen.
Kobe Steel closed up a fractional 0.09 percent at 1,110 yen moments before its chief executive Hiroya Kawasaki announced he was stepping down to take responsibility for a data-faking scandal. — AFP