Markets Firm on Plans for New Trade Talks

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chinaAsian benchmarks were broadly higher on Thursday morning after it was announced that the U.S. and China would resume high-level trade negotiations in early October. The high-level talks will follow lower-level trade meetings between the two countries later this month. In an official statement on its website, China’s Ministry of Commerce said that “Both sides agreed that they should work together and take practical actions to create good conditions for consultations.” The comments out of China came shortly after U.S. President Donald Trump broadcast his intention to be even tougher on China in his second term – if he is re-elected, and if the trade talks drag on until then.

China’s benchmark indexes, the Shanghai Composite and the Shenzhen Composite both surged on Thursday, trading up 1.56 percent and 1.57 percent respectively. But it was Japan’s Nikkei 225 which was the frontrunner of the day, jumping 2.31 percent as of 1:11 p.m. HK/SIN. South Korea’s Kospi gained 1.12 percent while Hong Kong’s Hang Seng Index gained 0.38 percent. The Asian rallies were also fueled by news that the Hong Kong government plans to withdraw the contentious proposed bill allowing extradition to China that has caused months of violent, disruptive protests in the country.

On the currency markets, traders fled the safe-haven yen that has been garnering a lot of attention in recent sessions. The dollar advanced 0.17 percent against the yen to 106.56. The dollar also advanced against its other currency partners. The sterling was down 0.07 percent against the greenback to $1.2241, while the euro fell 0.04 percent against the dollar to $1.1028.

Gold futures were also lower as traders found renewed confidence in the market in advance of the expected trade talks. The precious metal eased 0.42 percent to $1,553.90. Even silver, which reached fresh two-year highs on Wednesday, fell on Thursday, easing 0.16 percent to $19.515 per ounce.

In recent days many analysts have slashed their growth estimates for China’s 2020 gross domestic product (GDP) to less than 6 percent, Fox Business reported. Those cutting their forecasts including UBS, Bloomberg and Bank of America Merrill Lynch. If these forecasts prove true, the Chinese economy and the country’s ruling Communist Party could be plunged into (additional) turmoil. According to data published in the South China Morning Post, China’s GDP has grown 180 percent since 1952, while the U.S. GDP has grown only 44 percent. During this time, China has also transformed from a predominantly agricultural to society to one that is now focused on the industrial and services sectors. It seems that Chinese leaders understand the need to continue this growth and development. Hopefully they’ll use this as a starting point for the upcoming trade negotiations.

Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.