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August 14, 2019

Global stocks surge


August 14, 2019

Paris: Global stock markets rallied on Tuesday and oil prices surged in a wave of relief after US President Donald Trump delayed tariffs on electronic goods from China, giving investors hope for some detente in a US-China trade war.

The announcement caused a dramatic turnaround in equity markets, which had retreated earlier under the combined impact of tensions in Hong Kong, economic crisis in Argentina, fears of a global slowdown -- and uncertainty over US-China trade talks.

But some of that uncertainty appeared to have lifted when the US said it was delaying until December 15 the imposition of new 10 percent tariffs on Chinese electronics.

Meanwhile, US Trade Representative Robert Lighthizer spoke with Chinese Vice Premier Liu He early Tuesday and has another call planned in two weeks, a USTR official told AFP.

"US-China reach ceasefire on trade war," said Alfonso Esparza at OANDA.

"Equities surged with the news as the prolonged trade war has been the biggest negative factor hitting stocks," said Esparza.

US equities saw a dramatic turnaround after the news, with the tech-heavy Nasdaq index up around two percent, and the DJIA and S&P 500 indices not far behind.

Consumer electronics stocks led the way, with Apple more than four percent higher.

Oil prices, a bellwether for the global economic growth outlook, also surged, with Brent and WTI contracts up by around three percent.

Even though the US added that it was still going ahead with new duties starting September 1 on $300 billion in Chinese goods, it did not derail the markets´ enthusiasm.

The dollar also firmed strongly, especially against the yen, euro and Swiss franc.

"The news of the delay of some US tariffs on certain Chinese goods is positive for risk sentiment, although the full details aren´t yet known," said analysts at ING.

But "don´t get carried away with optimism", they warned. "The lack of visibility on the trade war outlook means that the above should not translate into a long-lasting trend."

Until Trump rekindled hope on the trade war front, equities had been showing signs of buckling under what Lukman Otunuga at FXTM called "a burst of geopolitical risks across the globe".

Weakness in Asian stock markets had spilled first into Europe and from there into early US trading.

A big factor of worry was Hong Kong, where airport authorities on Tuesday suspended all check-ins as pro-democracy protesters blocked the facility.

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