LONDON (Reuters) – Global shares rose on Monday amid growing optimism the United States and China will reach a trade agreement as soon as this month.
U.S. President Donald Trump and Chinese President Xi Jinping might seal a formal trade deal around March 27, given progress in talks between the two countries, the Wall Street Journal reported on Sunday.
The two nations have imposed tit-for-tat tariffs on billions of dollars worth of each others’ goods, roiling financial markets, disrupting manufacturing supply chains and shrinking U.S. farm exports.
A source briefed on the negotiations told Reuters the two countries appear close to a deal that would roll back U.S. tariffs on at least $200 billion worth of Chinese goods.
Stock markets welcomed the news, with European markets following their Asian counterparts higher. The pan-European STOXX 600 index was up 0.4 percent.
MSCI’s All Country World Index, which tracks shares in 47 countries, was up 0.1 percent on the day.
“The market rebound has been driven by the prospect of a US-China trade deal and the pause in Fed rate hikes,” said Rupert Thompson, head of research at UK-based asset manager Kingswood.
“While hopes on both fronts are likely to end up being vindicated, the good news would largely now seem to be in the price and the scope for further gains not that obvious.”
E-mini futures for the S&P 500 index of U.S. stocks were up 0.3 percent by midday in London.
In Asia, Chinese shares were the biggest gainers, with the blue-chip index up as much as 3 percent. The CSI300 index rallied last week after index provider MSCI quadrupled its weighting for mainland shares in its global benchmarks.
Australian shares rose 0.4 percent and Hong Kong’s Hang Seng index added 0.7 percent.
That left MSCI’s broadest index of Asia-Pacific shares outside Japan with gains of 0.3 percent. The index has risen almost 10 percent so far this year.
Japan’s Nikkei strengthened more than 1 percent.
March is expected to be a crucial month for global markets. Britain’s parliament will vote on an agreement to leave the European Union, the U.S. Federal Reserve will hold a policy meeting that could yield clues on its plans for interest rates and balance sheet reduction, and the European Central Bank will hold its scheduled policy meeting this week.
Morgan Stanley analysts noted that “easing on three fronts” globally — trade tensions, China’s monetary easing and the Fed’s flexibility and patience — were helping ease global financial conditions. “This easing trio is helping to reverse the global economy’s downward trajectory,” they said.
Surveys last week highlighted manufacturers’ pain, particularly those exposed to China’s slowdown, and added to expectations that central banks are finished tightening policy .
Citi’s Economic Surprise Index for the Group of Ten economies fell to its lowest since 2012 last week. The index shows that on average, economic data have been coming in below consensus forecasts.
Investors seemed to show a glimmer of hope however – after falling for six consecutive months, a survey of investor business morale for the euro zone ticked higher in March largely due to hopes that an upturn in Asia might help the single currency bloc.
Greece’s benchmark 10-year government bond yields dropped to their lowest since 2006 on Monday after Moody’s raised its rating late last week, bolstering investor optimism towards the euro zone’s most indebted country.
Moody’s on Friday lifted Greece’s issuer ratings to B1 from B3, citing the effectiveness of the country’s reform programme. The country plans to issue a 10-year bond this week, encouraged by the upgrade.
In currencies, the dollar index rose against a basket of major currencies to its highest in over a week. It was last higher 0.16 percent at 96.677.
Speculators have ramped up long dollar bets, with the latest positioning data showing net positions rising to $27.24 billion for the week ending March 1. Most of those bets are positioned to take advantage of higher U.S. interest rates.
The euro fell to its lowest in over a week, down 0.25 percent on the day at $1.1334.
Elsewhere, oil prices gained on Monday with Brent futures up 0.7 percent at $65.51 a barrel. U.S. crude rose 0.6 percent to $56.15.
(This story corrects asset manager name to Kingswood from Kingwood in the seventh paragraph).
Reporting by Ritvik Carvalho, additional reporting by Sujata Rao and Mike Dolan in London; editing by Larry King