AFP – European and American stocks ventured higher on Monday following a meltdown in Asia as financial markets seemed to march in lockstep with US President Donald Trump’s remarks on trade.
The American leader breathed some optimism into markets, telling reporters at an economic summit in France that Washington and Beijing would soon return to the bargaining table, appearing to change tack yet again amid some contradiction from Beijing.
Wall Street had the biggest gains of the day but they still left the major New York stock indices in the red for the month after Friday’s plunging sell-off.
“Considering the magnitude of the loss on Friday, the rally is a very mild one,” Peter Cardillo of Spartan Capital told AFP.
“There’s still a lot of uncertainties.”
Asian investors also pared steep losses after Trump said a fresh round of talks between US and Chinese negotiators would “start very shortly.”
There was a sense of whiplash from last week when Trump said the United States did not need a deal, raised tariffs on Chinese goods and proclaimed he was “ordering” US companies to pull out of China, stunning investors who ran for the hills, hammering stocks.
– ‘Emotions on sleeve’ –
But Gorilla Trades strategist Ken Berman said was less hopeful.
“Today’s rally was likely not based on the hope for a trade deal in the near future, rather on the relief that a scary new front of the trade war wasn’t opened,” he said in a commentary.
“The threat of a full-blown currency war was, a new front in the ongoing trade-skirmish was really behind Friday’s plunge, but today’s low-volume bounce shows that a lot of participants are still wary of a long spell of increased tariffs and tepid global trade.”
China’s yuan hit an 11-year low, while safe havens such as the yen and gold — go-to assets in times of turmoil and uncertainty — surged.
The latest series of US tariff hikes, increasing planned and existing duties by five percent, came in response to Beijing’s decision to raise levies on $75 billion of US goods.
US tariffs on $250 billion of Chinese goods are to rise to 30 percent starting October 1, while punitive fees planned on $300 billion in Chinese products were increased to 15 percent, to take effect in two tranches from September 1 and December 15.
Many investors no longer trust Trump’s statements, even when they appear to be reassuring, analysts said.
“Despite President Trump’s tweets reflecting positive discussions between the two countries, actions show the opposite,” said Hussein Sayed, chief market strategist at FXTM.
“It now seems to many market participants that negotiations may get out of control, and likely lead to steeper selloff in risk assets.”
– ‘Gloves off’ –
China’s yuan currency fell briefly to its weakest level since early 2008 at the height of the global financial crisis.
“The gloves are coming off on both sides and as such yuan depreciation is an obvious cushion against US tariffs,” Mitul Kotecha, a senior emerging markets economist at Toronto-Dominion Bank, said.
The flight to safer havens saw gold jump to a six-year high, while the Japanese yen touched its strongest level since the end of 2016.
Back in Europe, investors took a dim view of a German business leader survey showing their confidence fell in August to its lowest level since 2012.
“Germany is on the threshold of a technical recession,” said KfW economist Klaus Borger.
– Key figures around 2100 GMT –
New York – Dow: UP 1 percent at 25,898.83 (close)
New York – S&P 500: UP 1.1 percent at 2,878.38 (close)
New York – Nasdaq: UP 1.3 percent at 7,853.74 (close)
London – FTSE 100: Closed for public holiday
Frankfurt – DAX 30: UP 0.4 percent at 11,658.04 (close)
Paris – CAC 40: UP 0.5 percent at 5,351.02 (close)
EURO STOXX 50: UP 0.4 percent at 3,348.84 (close)
Tokyo – Nikkei 225: DOWN 2.2 percent at 20,261.04 (close)
Hong Kong – Hang Seng: DOWN 1.9 percent at 25,680.33 (close)
Shanghai – Composite: DOWN 1.2 percent at 2,863.57 (close)
Pound/dollar: DOWN at $1.2217 from $1.2290
Euro/dollar: DOWN at $1.1099 from $1.1145
Euro/pound: UP at 90.85 pence from 90.68 pence
Dollar/yen: UP at 106.08 yen from 105.39 yen
West Texas Intermediate: DOWN 53 cents at $53.64 per barrel
Brent North Sea crude: DOWN 64 cents at $58.70