Stockmarkets keep a beady eye on Donald Trump. But he is also “sensitive” to them, says Pete Sweeney on Breakingviews. December’s market wobbles have prompted the president to seek a “quick-and-dirty settlement” in the trade war with China. Trump has announced that he will postpone an increase in tariffs on $200bn of Chinese goods set for 1 March.
He said there had been “substantial progress” in trade talks. The US might also drop criminal charges against Huawei (for violating US sanctions on Iran and stealing US technology) as part of a trade deal, says The Wall Street Journal. In return, China could agree to buy large amounts of US products, such as soybeans. Chinese stocks surged following the announcement, with the CSI 300 index rising to its highest level since July. The S&P is up 11% so far this year. The CSI 300 shed a third of its value as trade tension worsened.
There may well be further gains ahead, even if optimism on the trade front is overdone. The latest data coming from China suggests that credit growth may be accelerating again, and this is positive for equities. Many other emerging markets “are largely a derivative play on China, and if China picks up they should too”, says Gavekal Research; especially since “emerging markets’ national balance sheets are strong and currencies started the year attractively valued”.