Global Stocks Rise On Partial US-China Trade Deal, Pound Up

Donald Trump hailed progress in the first day of trade talks between China and the US, fuelling optimism on markets AFP / Brendan Smialowski

Global stocks rallied Friday as US-China trade negotiations yielded a partial deal, while the British pound surged for a second straight session on signs that London and Brussels could still avert a no-deal Brexit.

The US-China agreement, announced in the closing minutes of Friday's Wall Street session, halts new US tariffs that were scheduled to go into effect next week and includes a Chinese promise to ramp up purchases of American farm products.

Expectations of the deal boosted stocks all day, but major US indices retreated from their peaks in the final moments of the session, ending with gains of a bit more than one percent.

Analysts said the stock market's pullback in the final moments likely reflected disappointment that the interim agreement did not go further, and left in place existing tariffs.

The announcement "sounds a little more limited than we were hoping for," said FTN Financial's Chris Low. "Nevertheless it is really good news."

The pact, characterized by US officials as the first phase in negotiations, capped a rollercoaster week for stocks, with the market retreating early in the week on doubts about the talks, but reversing course midweek as the signs from both sides became more conciliatory.

Beijing and Washington have been at loggerheads for more than a year, with US President Donald Trump emphasizing trade relations with China as a central tenet of his "America First" agenda.

"There was a lot of friction between the United States and China, now it's a love fest," Trump said. "It's beyond a trade deal."

Business groups praised the agreement, but alluded to the unresolved status of the broader trade conflict.

Energy firms rallied with oil prices after the attacks on the Saudi facilities AFP / Loren ELLIOTT

"Although this is a step in the right direction, the uncertainty continues," said David French, senior vice president at the National Retail Federation.

"We urge both sides to stay at the negotiating table with the goal of lifting all tariffs and fundamentally resetting US-China trade relations."

Brexit deal?

Earlier, European stocks also rallied, pushing higher on the positive developments on US-China and Brexit.

European officials were looking ahead to an EU leaders summit next week after an upbeat meeting Thursday between British Prime Minister Boris Johnson and Irish counterpart Leo Varadkar revived hopes about a Brexit deal.

The pound is struggling to recover as fears grow that Britain will leave the EU on October 31 without a divorce deal AFP / Justin TALLIS

The British pound rallied after the European Commission announced the EU and Britain agreed to "intensify discussions over the coming days.

"The Commission will take stock with the European Parliament and member states again on Monday," it added, to allow time to draw up the agenda of Thursday's EU summit.

The announcement also boosted the British pound.

David Cheetham at XTB said the latest developments may "be a pivotal turning point in negotiations" but more "clarity" was needed.

But Fawad Razaqzada at Forex.com also seemed to question the wisdom of buying into the British currency with such abandon despite lacking all the facts.