An unexpected potential easing in the trade spat between the US and China, as well as the promised breakthrough in US talks over trade with Canada and Mexico, have bolstered global shares.
The possibility of a breakthrough in the trade standoff between China and the US is helping to shake off some of the elevated caution that has infected global markets over the past week as Turkey has plunged into a currency crisis.
Lower-level trade talks between US and Chinese officials will take place on August 22 and 23, The Wall Street Journal reported, offering financial markets hope that the globe’s two largest economies could end trade tensions.
Meanwhile, US Trade Representative Robert Lighthizer said he hopes there will be a breakthrough in Nafta trade talks in the next few days, as the US continues discussions over the North American Free Trade Agreement.
Turkey’s lira rallied for a third day after the country’s Treasury and Finance Minister Berat Albayrak said on an investor call yesterday that the government has ruled out capital controls and that reining in inflation and narrowing the current-account deficit are its policy priorities.
Also helping was a dip in the dollar as well as a rally in the lira after Turkey’s finance minister said that the country would emerge from the current volatility stronger.
“Today has seen a reversal of fortunes for many markets, as traders reacted to news of a potential resurrection in trade talks between China and the US.
Some of the biggest losers this week have stemmed from a shift into the safe-haven dollar, with commodities tumbling and traders moving out of stocks,” said Joshua Mahony at online broker IG.
“While the Turkish crisis has eased, UK traders are also taking this opportunity to buy back into the recently beleaguered mining firms such as Antofagasta and Rio Tinto.
However, while we have seen markets transfixed with affairs in Turkey, the bigger picture was always going to be the relationship with China, which until today looked no closer to a resolution,” he said.
“When you have a solid earnings backdrop it makes it easier for investors to digest some of the bad news as it comes up,” said Shawn Cruz, manager of trader strategy at TD Ameritrade in Chicago.
“The news of China coming back to the negotiating table is providing relief and you are starting to see markets stabilise a little bit,” he said.
Irish Examiner, Bloomberg and Reuters