Hopes Of Positive Trade Talk Outcome Boosts Global Stocks

Global Markets
The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany (Photo: Reuters)

Global markets and economies are watching in anticipation as two of the world's largest economies engage in hard negotiations to finally settle their long-running trade disputes. With the recent turn of events pointing to a possible positive outcome in the US-China trade talks, global markets have reacted accordingly. Massive spikes and movements are seen with every announcement from both sides. As the latest round of talks kicks off in the United States, sentiments have gradually improved, which has resulted in boosted global market prices.

Oil prices have hit its highest levels this year, with Brent crude breaching US$70 per barrel. Late last year, prices hit a new low, with prices dropping below US$60 a barrel. The cost per barrel had dropped mostly because of a decreased in global demand, particularly from China, and an increase in output from the United States.

The recent increase in prices, on the other hand, was aided by optimism towards a possible resolution of the lengthy US-China trade talks and a globally tighter supply. Economists have remained positive that an amicable outcome of the trade talks would result in increased energy demand from China this year.

With positive comments being announced from both sides, global markets have rallied in response. Asian stock has reached seven-month highs, while European stocks have managed to remain in acceptable levels despite weakening manufacturing data and the ongoing fears of a possible no-deal Brexit. The DAX surged by around 1.2 percent, while the euro was pushed up to US$1.1250.

MSCI's broadest index of Asia-Pacific shares also hit highs that were not seen since August of last year, increasing by as much as 0.8 percent. Several other Asian indices followed suit, with the Hang Seng Index climbing by 1.22 percent and the Shanghai China Composite Index rising by 1.25 percent.

The recent market rally was also aided by the recent announcement of White House economic adviser Larry Kudlow, who had mentioned to reporters that the country is now making "more headway" in the trade talks with China. Fundamental traders are still looking for solid evidence of a resolution to the trade talks, but overall sentiments are optimistic given the slew of positive rhetoric from both sides.

Major US stock market indexes also reacted positively to the comments made by Kudlow. The Dow Jones Industrial Average rose by around 0.2 percent, while the S&P 500 climbed by the same percentage amount. The NASDAQ Composite Index also rose by 0.6 percent. The reports of both countries now being close to reaching a final agreement have also resulted in equities moving towards the green, with the biggest winners being stocks in the materials and technology sectors. 

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