China stock markets rally on Trump optimism before trade talks: ‘Good things are going to happen’

  • Chinese markets edged higher Monday ahead of new US-China trade talks.
  • “I think good things are going to happen” on a trade deal, US President Donald Trump told reporters on Sunday.
  • Adding to positive sentiment, the People’s Bank of China on Friday slashed its reserve requirement ratio by 1% as it seeks to remedy concerns about the Chinese economy.

Chinese markets rallied Monday on hopes that the resumption of trade talks with the US would help end a brutal period for equities. US and Chinese trade officials are set to begin two days of talks Monday in Beijing.

“I think good things are going to happen” on a trade deal, US President Donald Trump told reporters on Sunday, according to The New York Times.

Speaking after the Labor Department published nonfarm payroll figures Friday – which beat expectations in showing that 312,000 jobs were added the US economy in December – Trump raised the stakes on China once again. “China’s not doing very well now,” he told reporters at the White House following the report’s release. “It puts us in a very strong position. We are doing very well.”

Also lifting sentiment was eased monetary policy from China’s central bank. The People’s Bank of China made substantial efforts to ease lending conditions Friday with a 1% cut in bank’s reserve requirements ratios (the first of four possible cuts in 2019).

“The start of trade talks between the US and China is helping to lift sentiment, as is a move by the PBoC to ease monetary policy,” said Jasper Lawler, the head of research at London Capital Group. “Easing trade tensions in addition to Beijing proving that it is ready to step in where necessary is tonic to the markets amid fears of a global economic slowdown.”

Here’s the roundup:

  • In Asia, the Shanghai Composite closed up 0.7%, while the Nikkei bounced back from Friday’s losses to finish 2.4% higher. South Korea’s KOSPI closed 1.3% up.
  • European markets opened flat before falling amid weak German manufacturing data showed contracts for goods “Made in Germany” fell by 1% in November. The FTSE 100 was down 0.4%, while Germany’s DAX was down 0.3% as of 9:40 a.m. in London (4:40 a.m. EST).
  • US Futures were flat, with the Nasdaq down 0.2%.
  • Brent crude oil prices rose 2.1% on US-China trade-war hopes, while gold was also up 0.5%.

It’s a sign the trade war could be swinging in the US’s favor with the strain of $250 billion in tariffs knocking the Chinese economy. Though trade talks are expected to be held between mid-level officials, there is optimism that further compromise can be reached ahead of the reintroduction of tariffs on March 2.

US markets have also been buoyed by the Federal Reserve’s comments about patience and flexibility on interest rates on Friday.