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Rolling coverage of the latest economic and financial news, as shares surge in Asia and Europe
Introduction: US and China reach trade truce
US had decided not to hike tariffs from 10% to 25% in January Analysts: There’s still work to do
Fears that 90-day truce may not deliver permanent deal China’s stock market jumps almost 3% LIVE Updated
An electronic stock board in Tokyo today, as shares advance across Asia. Photograph: Koji Sasahara/AP Graeme Wearden
Mon 3 Dec 2018 07.58 GMT First published on Mon 3 Dec 2018 07.19 GMT
Share on Facebook Share on Twitter Share via Email Key events Show 7.51am GMT 07:51 Yuan jumps 7.38am GMT 07:38 …but US and China accounts differ 7.30am GMT 07:30 Trade truce: What the experts say 7.10am GMT 07:10 The agenda: Trade truce cheers investors Live feed Show 7.58am GMT 07:58
A crop of soybeans being harvested at a farm in Hickory, North Carolina, last week Photograph: Charles Mostoller/Reuters
Soybeans prices are moving sharply this morning, on relief that Washington and Beijing have backed away from a deeper trade war.
Trump’s claim that China will “immediately” start buying more US products has driven soybean prices up by 3% on the Chicago futures market.
However, they’ve dropped in China — as traders anticipate a surge in supplies from America’s farmers.
Bloomberg has more details:
“The price spike in Chicago soybeans and the fall in Dalian is a normal market reaction to the U.S.-China trade truce because China has agreed to start buying agricultural products from American farmers immediately,” said Monica Tu, an analyst at researcher Shanghai JC Intelligence Co.
Still, “the market is very concerned about the outcome of further negotiations,” and whether there will be big purchases in the next few weeks, she said.
Facebook Twitter Google plus 7.51am GMT 07:51
Yuan jumps China’s currency is strengthening, on relief that America has decided not to hike tariffs on Chinese imports at the start of January.
The yuan has jumped by 1% against the US dollar, to ¥6.88 to $1. That’s up from ¥6.954 on Friday night, before the G20 summit got up to speed.
Hussein Sayed, Chief Market Strategist at FXTM,
What was delivered over the dinner was not a breakthrough, neither a long-term solution for the ongoing trade war between the largest two economies, but a 90-day window to improve relations.
Introduction of new tariffs are now shelved, and trade talks will intensify over the next three months. This outcome seems to be an optimistic one from the two leaders and more than what was priced into markets beforehand, meaning that this is enough to boost sentiment and risk-on trade.
But, don’t forget the White House’s 90-day deadline….
Mike Bird (@Birdyword) I am yet to speak to a single person who thinks the three month tariff detente is actually a meaningful medium-long term development in the trade disputes https://t.co/E6k7OYvmGt
December 3, 2018 Facebook Twitter Google plus 7.38am GMT 07:38
…but US and China accounts differ
A newspaper featuring a front page story about the meeting between US President Donald Trump and Chinese President Xi Jinping at a news stand in Beijing on December 3, 2018. Photograph: Greg Baker/AFP/Getty Images
Chinese newspapers have cheered the truce hammered out between Trump and Xi at the G20 leaders meeting.
The Global Times called the deal a “momentous step forward”, while the People’s Daily dubbed it an “important consensus”.
However, China has NOT backed up the White House claim that the ceasefire will only last for 90 days, unless a permanent trade deal is reached.
As CNBC explains:
Official online statements about Chinese Foreign Minister Wang Yi’s briefing on the meeting did not discuss the technology transfers or the 90-day condition.
The timeframe and details on areas of disagreement also did not appear in online reports from China’s state news agency Xinhua , People’s Daily — the official Communist Party paper — and CGTN — the English-language version of state broadcaster CCTV.
The articles did note the U.S. and China agreed to work towards mutual benefits, and generally indicated Beijing would increase purchases of U.S. goods. The state media also said the two parties discussed North Korea denuclearization. The Chinese press also said Trump upheld a “One-China Policy” regarding Taiwan — something not mentioned in the White House statement.
Facebook Twitter Google plus 7.30am GMT 07:30
Trade truce: What the experts say
European stock markets are expected to jump this morning Photograph: Bloomberg TV
Sue Trinh of Royal Bank of Canada is cautious about this trade truce — pointing out that the US and China haven’t released a joint statement on what was agreed.
But she also believes this is a win for president Trump:
Trade wars need to be framed in terms of who hurts the least and see the G20 meeting as a stronger win for the US.
China buys 3 months before tariffs on $200bn in goods rise to 25% while the US knows it will have a deal with sizeable China concessions in 90 days, or go ahead with tariffs having cleared the backlog of harvested crops from the agri sector.
Tai Hui, chief market strategist for Asia Pacific at J.P. Morgan Asset Management, is also wary, saying:
The negotiation is likely to remain challenging given the competition in a number of areas, especially technological development between the two countries. 90 days is not a very long to resolve these differences.
The good news is that this truce should be seen as Washington recognising the potential damage on the U.S. economy if tariffs escalate further. We see an ongoing dialogue between the two sides to be an important catalyst for Asian markets to recover lost ground this year, alongside steady global growth and a weaker US dollar.”
Facebook Twitter Google plus 7.10am GMT 07:10
The agenda: Trade truce cheers investors
U.S. President Donald Trump, second right, and China’s President Xi Jinping, second left, attend their bilateral meeting at the G20 Summit in Buenos Aires, Argentina. Photograph: Pablo Martínez Monsiváis/AP
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Global stock markets are rallying today on relief that America and China have pulled back from escalating their trade war.
In one of the most eagerly awaited dinner dates in a while, Donald Trump and Xi Jinping struck a truce at the end of the G20 meeting in Buenos Aires.
After the dinner, Trump declared:
“This was an amazing and productive meeting with unlimited possibilities for both the United States and China.
It is my great honor to be working with President Xi.”
However, the agreement is light on detail. We know that America has deferred its plan to raise the tariff on $200bn of Chinese imports from 10% to 25%, for 90 days (it was scheduled for 1 January).
This kicks the can down the road a little, teeing up more tense talks before the end of March.
In return, China has apparently agreed to purchase a “very substantial” amount of US goods – including farm, energy and industrial products. That would help narrow the massive trade gap between the two countries.
Trump has declared that China is also removing tariffs on US car imports — which would be a win for America’s auto sector
Donald J. Trump (@realDonaldTrump) China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%.
December 3, 2018 Trade war truce: markets jump as Trump says China will halt new car tariffs Read more
However, the two sides will now face fraught talks over intellectual property protections, and the threat that the truce could break down at an time.
Still, investors are delighted to hear peace ring out.
Asian markets have surged overnight, with China’s Shanghai Composite jumping by 2.5%. That’s its biggest one-day gain in a month.
Australia has gained 1.8%, and Japan’s Nikkei is 1% higher.
Stephen Innes of trading firm OANDA says:
With the immense weight of the global supply chain dynamic network on their shoulder, a tariff detente has emerged after a highly anticipated dinner.
Both Presidents’ XI and Trump have agreed to put on hold the menacing tariff increases expected to get imposed January 1, marking a significant de-escalation in trade tensions between the world’s two biggest economies. Thankfully, for risk sentiment, the “dinner date of the decade” ended with a sense of harmony rather than trade war discord.
European markets are going to join the party too, and are expected to gain almost 2% at the open….
IGSquawk (@IGSquawk) Firm opening across all European Indices: #FTSE 7094 +1.63% #DAX 11519 +2.32% #CAC 5092 +1.75% #MIB 19486 +1.55% #IBEX 9221 +1.59%
December 3, 2018 Also coming up today… We find out how the world’s factories fared in November, when the latest surveys of purchasing managers are released. They’ll probably confirm that the eurozone has slowed sharply, while the US economy is more robust.
The agenda 9am GMT: Eurozone manufacturing PMI report for November
9.30am GMT: UK manufacturing PMI report for November
3pm GMT: US manufacturing PMI report for November
Updated at 7.21am GMT
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