U.S. President Donald Trump and China’s Xi Jinping concluded talks on Thursday at a South Korean air base, with both leaders sounding optimistic about cooling trade tension between the world’s two largest economies, according to Reuters. President Trump said he struck a deal to reduce tariffs on China in exchange for Beijing resuming U.S. soybean purchases, keeping rare earths exports flowing, and cracking down on illicit trade of fentanyl.

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Market Analysts React

Kyle Rodda, Senior Market Analyst at Capital.com in Melbourne, noted that the price action suggests the news was largely priced-in, with markets rallying earlier in the week on expectations. “Arguably, the markets were hoping for the complete removal of the fentanyl tariff, so that could explain the ambivalence,” he said.

Vincent Chan, China Strategist at Aletheia Capital in Hong Kong, pointed out the lack of detail. “The bottom line is that China and the United States are probably the most important strategic competitors of each other. So you cannot expect the kind of trade agreement we saw during the globalisation era… any agreement will be unstable in nature.” He added that while markets remain volatile, they are less so than in April, and that both sides have enough bargaining chips to prevent the worst-case scenario.

Marco Sun, Chief Financial Market Analyst at MUFG Bank (China) in Shanghai, stated that the meeting has calmed financial markets. “It is anticipated that the meeting will pave the way for deeper trade and economic discussions between the two countries. Long-term relations and industrial developments are expected to be reshaped through mutual compromise,” Sun said. Emanuel Datt, Principal at Datt Capital in Melbourne, expects broad equity market upside. “The strongest likely to be high beta stocks such as technology and biotech – as well as conventional sectors such as logistics. The weakest equity sectors should be gold and rare earth equities,” Datt commented.

Source: IndexBox Market Intelligence Platform