Saturday 15 December 2018

Irish shares join global rally amid trade war relief

US President Donald Trump and Chinese President Xi Jinping Photo: Bloomberg
US President Donald Trump and Chinese President Xi Jinping Photo: Bloomberg

Gavin McLoughlin, Justina Lee, and Sarah Ponczek

Markets rallied strongly around the globe yesterday as investors breathed a sigh of relief, digesting news of a ceasefire in the US-China trade dispute.

The Iseq index of Irish shares was among the gainers, with stocks with wide international exposure such as CRH, Smurfit Kappa and Kingspan posting strong rises.

The Dow, Nasdaq and S&P rallied at the open and held gains into the afternoon, following European and Asian shares higher after Donald Trump and Xi Jinping agreed to hold off on new tariffs and intensify trade talks.

"The trade truce is a positive for US equities because it temporarily removes some of the worst-case tariff scenarios," said Matthew Litfin, a portfolio manager at Columbia Threadneedle Investments. "Three months is a short time to hold significant negotiations, and global growth appears to be slowing, so I don't expect investor euphoria to persist."

The truce between the US and Chinese leaders at the Group of 20 summit in Argentina has gone some way in calming investor fears over the state of global growth after a tumultuous period.

The US had been scheduled to push ahead on January 1 with increased tariffs on $200bn (€176bn) worth of Chinese goods.

"It's easy to see the trade deal as a half empty - that it's just a postponement and that they'll work together, but that there really isn't any kind of resolution," said Jeff Kleintop, chief global investment strategist at Schwab Centre for Financial Research.

"But I think you can see it as a glass half full. The EU and Japan have joined with the US in some WTO complaints in recent months. That adds some weight to US demands on China."

The Stoxx 600 index of European shares surged as much as 2.1pc yesterday, its highest since April. It was also helped by reports that Italy's government is prepared to back down from its deficit target amid an ongoing standoff with the EU over spending plans. The Ftse 100 closed up 1.2pc, while in Germany the Dax was up 1.8pc, and France's CAC 40 rose 1pc.

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The Iseq index rose 0.5pc, closing at 5847.62.

Elsewhere, the pound erased an earlier gain as the threat of a vote to bring down British Prime Minister Theresa May's government looms should Parliament reject her Brexit deal.

That raises the stakes even further as lawmakers begin debating her plan this week. China's yuan climbed with emerging market assets. Gold and copper rallied, as did most other commodities.

Chronic underperformers of the year - carmakers - got an extra boost when President Trump tweeted that China will "reduce and remove" tariffs - which Beijing has yet to confirm.

"The [Trump-Xi] meeting managed to avert a significant escalation that could have deepened the recent sell-off in global equities," Mark Haefele, global chief investment officer at UBS Wealth Management, wrote in a note.

But he added: "The rivalry between the US and China will not be easily overcome, especially over the issue of intellectual property and market access. A breakdown of talks will remain a risk for markets and the global economy."

Bloomberg

Irish Independent

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