US stocks and China’s currency rallied sharply on Tuesday after Washington announced a delay to some additional tariffs on Chinese imports, offering investors hope of an easing in trade tensions between the world’s two largest economies.
The S&P 500 rose more than 2 per cent at its high following the announcement from the Trump administration, while perceived haven assets such as US Treasuries, gold and the Japanese yen sold off. China’s offshore renminbi, which trades in financial centres outside of mainland China, rallied more than 1 per cent against the US dollar.
Washington is planning to impose an additional 10 per cent of tariffs on about $300bn of Chinese imports, but US trade representative Robert Lighthizer said tariffs will be delayed on some technological items such as cell phones, laptops and video game consoles until December 15. Others will be removed from the tariff list entirely “on health, safety, national security and other factors”.
The news came as China announced high level telephone talks between envoys including Mr Lighthizer. A further conversation in two weeks has been agreed.
The benchmark S&P was up 1.6 per cent in midday trading in New York, with technology and financial shares among the biggest winners. The tech-heavy Nasdaq Composite surged 1.9 per cent.
US Treasuries, which have rallied sharply in recent weeks on trade tensions and worries over slowing global growth, dropped in price, sending their yields higher.
The yield on the short-term US two-year bond rose 8.1 basis points to 1.6605 per cent, while the 10-year yield rose 4.1 basis points to 1.6812 per cent.
Gold staged a notable turnround as news of the reprieve broke, and was recently down 0.7 per cent, having touched fresh six-year highs with a rise of 1 per cent earlier in the day. The Japanese yen fell 1.2 per cent against the US dollar as risk-off sentiment faded.
The apparent softening of trade tensions changed the complexion of a trading day which had earlier been dominated by spiralling investor concerns including unrest in Hong Kong, market ructions in Argentina and a slowing global economy.
European shares reversed course to trade higher, with the Stoxx Europe 600 up 0.5 per cent. Germany’s trade-sensitive Dax moved 0.6 per cent higher, having earlier fallen more than 1 per cent after a closely watched survey showed expectations for the German economy have fallen to their lowest level since 2011.
Asian stocks had fallen after protesters disrupted Hong Kong’s airport in an escalation of the city’s largest political crisis since the handover from Britain to China in 1997. The Hang Seng index fell 2.1 per cent, and has lost almost a tenth of its value this month as investors have reacted to the rising tension in Asia’s key financial centre.
“These developments will increase tension with mainland China and damage the Hong Kong economy, with growing fears that the region will enter recession,” ANZ analysts said in a note.
Argentina’s peso fell for a second day on political fears, sliding more than 4 per cent to 55.4 pesos per dollar. The drop comes after the currency lost more than a fifth of its value at one stage during the previous session as the market worried over the possible the return of populist policies.