[new york] “Substantial progress” made in US-China trade relations after two days of talks in Switzerland is likely to boost sentiment in Asia, according to some strategists, while others were awaiting further details.
While neither side immediately announced specific measures on Sunday (May 11), Chinese Vice-Premier He Lifeng said the world’s two biggest economies agreed to create a mechanism for further discussions. US Treasury Secretary Scott Bessent said the US would share details on Monday.
Here’s what market watchers are saying:
Tim Waterer, chief market analyst at KCM Trade in Sydney
“Lower tariff levels from the US and China on each other would go a long way towards easing fears about how global growth may fare in the second half of the year. We are seeing US futures jump in response to the trade meeting, and Asian markets are/look like they will be trading in spiritedly fashion also.
“I expect that the headlines emanating from the meeting in Switzerland will have Asian stocks on the front foot today, with a view towards a more normalisation of trade relations between the US and China taking effect.
“The US has touted that a deal of some description has been reached with China, which should further reduce the tariff-related anxiety levels of markets.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
“While details of the deal are scant, the important thing for risk-assets is progress has been made and that in all likelihood we may well be seeing the world’s two largest economies reducing tariffs levels on each other soon.”
Kazuhiko Sano, chief fixed income strategist at Tokai Tokyo Securities
“Although the specifics of the US-China trade talks remain unclear, risk-on sentiment is likely to gain momentum following the self-congratulatory remarks about ‘significant progress.”
Billy Leung, senior investment strategist at Global X ETFs
“Outcome is still fluid, with the US side indicating that full details will be released the following day. Most market signals suggest a constructive outcome, with equity futures and the US dollar both trading higher. The key number being watched is a potential reduction in US-imposed tariffs to 80 per cent (down from 145 per cent). With Chinese and US equities already rallying around 14 per cent since the Apr 7 lows, the bar is arguably high.
“Still, anything below 80 per cent should be viewed as a positive surprise, with 50 to 60 per cent levels likely to be bullish. In that scenario, trade and export-sensitive sectors such as apparel would benefit, alongside broader growth-related exposures.”
Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management
“It’s not yet clear what exactly is involved, so we’ll have to wait and see what comes out going forward.
“The yen is weakening, and at the very least, there doesn’t seem to be a negative market reaction. As we wait for specific announcements, the general trend of recovery is likely to continue.”
“It will be a surprise if they lower the tariff rate at the first meeting” given China’s previous hardline stance.
Sean Callow, a senior analyst at InTouch Capital Markets in Sydney
“Given the starting point is a virtual trade embargo, FX traders would probably like to hear something more than boilerplate lines about progress that anyone on Friday should have expected.
“The Chinese yuan is finding some buyers but remains inside recent ranges, while the rise in the Aussie and Kiwi so far has been pretty lame.”
Shoki Omori, chief desk strategist at Mizuho Securities Co in Tokyo
“The absence of concrete results after extended weekend deliberations has tempered market exuberance, making it challenging for investors to adopt a wholly optimistic stance.
“Foreign exchange markets appear poised for continued turbulence. Overall conditions still favour the US dollar, putting the USD/JPY pair on track for further upside. Yet, the imminent release of US Consumer Price Index, Producer Price Index, and retail sales data could temper the pair’s recent gains, underscoring the possibility of a “shock” correction. Moreover, should the market tilt toward excessive optimism, any ensuing downturn could be sharp, potentially driving the pair back toward the 144 yen range.
“At the same time, Japanese government bonds (JGBs) are bracing for a bear steepening of the yield curve over the coming week. Rising US Treasury yields are already exerting upward pressure on JGB rates, and Tuesday’s scheduled 30-year JGB auction stands out as a notable concern. Thin demand in the super-long end of the curve, in conjunction with the climb in US yields, carries a heightened risk of further steepening. Under these circumstances, mid- to long-term maturities are set to be significantly swayed by movements in US interest rates in the near term.”
Nick Twidale, chief analyst at AT Global Markets Australia
“Overall it seems very positive for risk. We will need confirmation of details in the next few sessions, but I think the fact that both sides are advising that the talks are going well can only be seen as a good thing. However, as with everything in this environment, there is a reason for caution, and traders will be prepared to hit the sell button if we get a change of heart from the US administration.”
Win Thin, global head of markets strategy at Brown Brothers Harriman & Co in New York
“While we remain sceptical that anything of substance could be agreed upon after only two days of talks, it’s clear that both sides are looking to de-escalate the situation. I think the dollar rally could be sustained near-term but details of the deal to be revealed later. Any disappointment would reverse these moves.” BLOOMBERG
