Markets rally on US tariff reprieve, possible China stimulus

HONG KONG: Asian and European stocks rose on Thursday as investors welcomed US President Donald Trump’s auto tariff delay while expecting China to announce a large stimulus package.

The White House announced on Wednesday that vehicles imported under the United States, Canada and Mexico free trade pact would be exempt from tariffs for one month, after Trump held talks with the ‘Big Three’ US automakers -- Stellantis, Ford and General Motors.

US automakers have been among the most exposed to Trump’s trade policy, which saw 25 per cent blanket tariffs imposed on the United States’ neighbours this week -- with a lower rate for Canadian energy.

Wednesday’s tariff delay buoyed global markets and lifted the auto sector, with stocks in Shanghai, Tokyo and Seoul also rising Thursday. Hong Kong’s stock exchange closed up 3.3 per cent.

“We have little details on what products the pause will cover -- whether this will only apply to finished cars or also automotive parts -- but given the exceptional degree of integration across North America for this industrial value chain, the decision is hardly surprising,” said Maeva Cousin of Bloomberg Economics.

A global bond selloff also spread to Asia on Thursday as geopolitical sways over the past weeks, including Ukraine peace efforts and trade tariffs, drove benchmark yields upwards. Japanese 10-year yields hit 1.5 per cent for the first time in more than a decade while bonds in Australia and New Zealand also saw their yields jump. The selloff was triggered by a sharp rise in German bund yields after Berlin announced on Wednesday plans to massively boost defence spending. London’s stock market opened down, while Paris and Frankfurt were up.

‘Full confidence’ of hitting 5pc

Chinese stocks were also responding well to Beijing announcing its 2025 growth target of around five percent, at the start of its annual meeting of the National People’s Congress (NPC) on Wednesday.

China has vowed to make domestic demand its main economic driver despite facing persistent economic headwinds, and as an escalating trade war with the United States hit exports.