Stocks rise on news of cease-fire in US-Chinese trade war

Tokyo — Stocks rose on Monday as US Treasury Secretary Steven Mnuchin declared the US trade war with China “on hold”, following an agreement to drop tariff threats that have roiled global markets this year.

US S&P mini futures rose 0.60% in Asian trade on Monday.

MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.55% in early trade, led by strong gains in greater China.

Hong Kong’s Hang Seng was up 1%, Taiwanese shares added 1.1% and mainland Chinese shares rose 0.4%. Japan’s Nikkei gained 0.4%.

Mnuchin and US President Donald Trump’s top economic adviser, Larry Kudlow, said the agreement reached by Chinese and American negotiators on Saturday set up a framework for addressing trade imbalances in the future.

“The weekend talks appear to have made progress. While they still need to work out details of a wider trade deal, it is positive for markets that they struck a truce,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities.

As safe-haven demand for debt fell, US bond prices were under pressure, keeping their yields not far from last week’s peaks.

The 10-year Treasuries yield stood at 3.065%, near a seven-year high of 3.128% hit on Friday.

“Recent data suggests the US economy is very strong, hardly slowing down in January-March. The world economy slowed in that quarter but it appears to be rebounding. And recent rises in oil prices are likely to lift inflation expectations further,” said Tomoaki Shishido, senior fixed income analyst at Nomura Securities.

“We expect more selling until the next Fed’s meeting in June,” he said.

In the currency market, higher US yields helped to strengthen the dollar against a wide range of currencies.

The euro dipped 0.1% to $1.1756, hovering above Friday’s five-month low of $1.1750.

The common currency was also hit after two anti-establishment parties pledged to increase spending in a deal to form a new coalition government.

The dollar maintained an uptrend against the yen, rising 0.2% to fetch ¥110.97, close to Friday’s four-month high of ¥111.085.

Oil prices held firm near three-and-a-half-year highs, also on easing trade tension between the world’s two biggest economies.

The market is keeping an eye on Venezuela, though, where President Nicolas Maduro appeared to be set for re-election, an outcome that could trigger additional sanctions from the US as well as more censure from the European Union and Latin America.

Oil prices have been supported by plummeting Venezuelan production, in addition to a solid global demand and supply concerns stemming from tensions in the Middle East.

US crude futures rose 0.8% to $71.83 a barrel, near last week’s three-and-a-half-year high of $72.30, while Brent crude futures notched up 0.8% to $79.10 a barrel. They had risen to $80.50 last week, their highest since November 2014.