Tariff Hike Delay Sends Asian Markets Mostly Higher

Chinese Tarriffs

In a Twitter post on Wednesday, U.S. President Donald Trump announced that he will postpone the upcoming tariff increases on Chinese products from October 1st to October 15th as a “gesture of good will,” following Chinese Vice Premier Liu He’s request to postpone the tariff hike because the People’s Republic of China will be celebrating its 70th anniversary on October 1st.

Japan’s Nikkei 225 and MSCI’s broadest index of Asia-Pacific shares outside Japan were both trading near six-week highs following Trump’s tweet, bolstered by renewed optimism about a trade deal. As of 1:16 p.m. HK/SIN, the Nikkei 225 was up 1 percent. The Shanghai Composite also posted gains, up 0.23 percent, with the Shenzhen Composite seeing a 0.20 percent gain in the early afternoon. South Korea’s Kospi also benefitted from renewed trader optimism, trading up 0.84 percent. Only Hong Kong’s Hang Seng Index bucked the trend, falling 0.23 percent. The Asian upswing followed a higher close on Wall Street where all three benchmark indexes closed higher. Analysts are quick to point out, however, that Trump’s “gesture” may add false security into the markets and should not necessarily be understood as an attempt to advance the trade talks.

“Things change very quickly, it’s hard to know what motivation there is – to be honest- on the U.S. side. So I wouldn’t read too much into a small concession suggesting that we’re on the road to this being resolved,” Fitch’s global head of sovereign ratings, James McCormack, told CNBC on Thursday morning.

That being said, there’s no question that the comments moved markets nearly immediately. Gold futures dropped quickly after the tweet, with futures falling as low as $1,501.70 per ounce before rebounding above the $1,504 level. Gold prices hit a six-year high on September 4th and have dipped nearly 4 percent since then as traders sold off due to renewed optimism about the state of the trade war and the global economy on the whole.

For now, all eyes are on the European Central Bank which will be releasing a statement later today about its plans for economic stimulus. The ECB is likely to cut a key interest rate further below zero and to announce plans to introduce money back into the European economy. Unfortunately, as this is Mario Draghi’s second-to-last meeting as the ECB head, traders will be left questioning what will come next during the next leader’s tenure, a sentiment which has left both traders and analysts unsettled even during this time of stimulus.

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