Asian stocks rose Monday, lifted by what appeared to be an at least temporary thaw in trade tension between the U.S. and China. Equity indexes in China, Hong Kong, Japan and South Korea all rose. Investors in the U.S. also reacted positively. S&P 500 futures rose 0.6%.S&P 500 futures gained 0.6%. The benchmark 10-year Treasury yield remained above 3%, near a seven-year high. And the dollar rose again, notching another six-month high.
It’s really tough to get a solid grasp on what’s happening in the trade turmoil between the U.S. and China. But on Monday at least, stocks reacted positively to the latest news.
One day, the world’s two largest economies countries are sparring over tariffs; the next they seem to be inching toward a resolution. Or, as it happened over the weekend, the above can happen almost simultaneously.
U.S. Treasury Secretary Steven Mnuchin grabbed headlines on Sunday by telling Fox News that the U.S. was “putting the trade war on hold.” Hours later, U.S. Trade Representative Robert Lighthizer said tariffs remained an important tool to “protect our technology.”
In their initial reaction to those comments, markets in Asia reacted positively. Hong Kong’s stock index was among the biggest gainers, rising over 1%. As the chart shows, several Chinese shipping stocks rose sharply following Mr. Mnuchin’s comments. Chinese pork producer WH Group Ltd. , which owns U.S.’s Smithfield Foods, jumped 7.1%, hitting a fresh two-month high.
As always with these trade talks, a hint of skepticism is required. Views on both sides have flip-flopped repeatedly over the past few months, creating confusion in the markets.
The good news is that markets should learn to live with it and consider its impact more rationally.
