The United States and China announced a tentative trade deal on Friday which resulted in the stall of fresh tariffs that were expected to go into effect yesterday. While the deal should have provided relief for the recently turbulent markets, both Asian stock benchmarks and the U.S. dollar struggled on Monday as traders and analysts worldwide felt frustrated by the lack of details released about the new trade deal.
The U.S. dollar slumped against most of its primary trading partners, with the dollar index down 0.24 percent as of 3:32 p.m. HK/SIN on Monday. The dollar nursed its steepest losses against the British pound which surged 0.62 percent in the mid-afternoon in Asia. The sterling was trading at $1.3407, while the euro gained 0.27 against the dollar to trade at $1.1149. The dollar also fell 0.17 percent against the Canadian dollar, fetching $1.3142.
The safe-haven yen which has been enjoying higher than usual volatility in light of the trade war fell slightly against the dollar as traders relished the new trade deal, at least in part. The dollar was up 0.02 percent against the yen to 109.38.
According to U.S. Trade Representative Robert Lighthizer, the new trade deal will nearly double U.S. exports to China in the next two years. The only thing left, he said on Sunday, is a translation of the deal and revisions to the text. According to Reuters, the pending trade deal will reduce some U.S. tariffs on Chinese products and see an increase in Chinese purchases of U.S. goods to the tune of some $200 billion. Among the products that China has pledge to purchase include agricultural goods, energy products and manufactured items. China has also committed to better protection of U.S. intellectual property and to stop manipulation of its currency, among other financial goals. A date for signing has not been publicized, leading traders to worry that the deal isn’t quite as solid as the media has reported. In fact, Reuters has reported that Chinese officials claim the wording and revisions to the deal draft will be critical in ensuring that it passes, as the current language isn’t quite satisfactory for the Chinese negotiators.
Asian stock benchmarks were mostly lower on Monday afternoon after ending the week higher on Friday. Japan’s Nikkei 225 eased 0.29 percent as did Hong Kong’s Hang Seng Index, while South Korea’s Kospi shed 0.10 percent. Both of China’s benchmarks, the Shanghai Composite and the Shenzhen Composite, gained on the trade deal optimism, gaining 0.56 percent and -1.56 percent respectively. Australia’s ASX 200 saw the steepest gains, trading up 1.63 percent.