Asian stock markets reacted to the increased optimism about a possible US-China trade deal.
Japan’s Nikkei rose about 0.5% while South Korea’s Kospi gained 0.2%, China’s Shanghai Composite index closed flat. Hong Kong’s Hang Seng was the only major stock market in the Asian region which witnessed a drop. Hang Seng closed 0.2% lower.
The U.S. and China agreed to resume trade talks and will meet soon. The negotiations which have failed for months now may see some light of the day. Asian stock markets rallied after this announcement. U.S. stock futures were positive on Friday. Market analyst Jeffrey Halley mentioned in a research note that the news of trade tensions lowering down is making the entire buzz in the market. Rating Agency Fitch downgraded Hong Kong’s rating from AA+ to A.A., citing the instability caused due to civil unrest. This unrest, along with the ongoing trade war is pulling down Hong Kong’s creditworthiness, said the rating agency.
Fitch also commented that Hong Kong’s “considerable financial buffers” would remain intact. U.S. Federal Reserve’s chairman, Jerome Powell, is supposed to speak about America’s economic and monetary policy in Switzerland. It is expected that investors would be focusing on this and then the U.S. jobs report.
The two largest economies of the world – U.S. and China have been engaged in trade disputes for over a year now. President Donald Trump alleges that the Chinese steal American research which causes billions of dollars of loss to the American economy. Another point of contention has been the trade imbalance between the two superpowers. In 2018, China exported $540 billion worth of goods and services to the U.S. while it imported only $120 billion. The two countries have been applying sanctions on each other in a tit-for-tat response. While the countries have tried to reach an agreement before, all attempts have been unsuccessful.