Asian markets extend global rally as Trump fuels trade deal hope

Donald Trump's tweet on his talks with Xi Jinping came just before he launched his re-election campaign in Florida. (Photo: AFP/Mandel Ngan)

The US president's comments provided a much needed boost to investors after a month of volatility sparked by his shock decision to hit China with fresh tariffs, ending months of apparently positive negotiations.

Adding to the upbeat mood were comments from the European Central Bank head Mario Draghi hinting at a cut in interest rates to support the stuttering eurozone economy.

The Federal Reserve is also due to end its latest policy meeting later Wednesday, with dealers hoping for some idea about its plans for rates.

After a healthy lead from Wall Street, the vast majority of Asia's markets posted gains of at least one per cent - with Hong Kong leading the way by jumping more than two per cent.

Tokyo ended 1.7 per cent higher, Shanghai added one per cent, Singapore put on 1.5 per cent and Sydney 1.2 per cent.

Taipei added two per cent, while Wellington, Seoul, Manila, Jakarta and Bangkok were above the one per cent level. Mumbai was also in positive territory.

In early European trade, London dipped 0.1 per cent, having risen more than one per cent Tuesday, while Frankfurt and Paris were also slightly higher.

The rally was sparked after Trump tweeted: "Had a very good telephone conversation with President Xi of China. We will be having an extended meeting next week at the G-20 in Japan. Our respective teams will begin talks prior to our meeting."

Later he told reporters "the meeting might very well go well", adding that China wanted to make a deal.

"China and the US will both gain by cooperating and lose by fighting," Xi told Trump, according to a readout by Chinese state broadcaster CCTV.

'STRONG INCENTIVE'

Trump's tweet followed weeks of speculation about whether the heads of the two most powerful economies would actually meet on the sidelines of the G20 in Osaka. Trump had warned that if Xi did not turn up he would hike tariffs on virtually all China's exports to the US.

However, analysts pointed out that it was in both of their interests to bring an end to the long-running dispute.

"There is strong incentive for both presidents to re-engage," said Tai Hui, chief market strategist for Asia-Pacific at JP Morgan Asset Management.

"Trump is kick-starting his (re-election) campaign and he will need strong economic performance over the next 18 months. President Xi will also need trade tensions to cool down to support China's domestic economy, while pursuing financial market liberalisation."

The optimism underpinned a rally in riskier assets, with high-yielding currencies benefiting. South Korea's won jumped 0.8 per cent, the South African rand added 0.9 per cent and Indonesia's rupiah gained 0.4 per cent.

The Chinese yuan, which has struggled in recent weeks, climbed 0.4 per cent.

The euro, however, extended Tuesday's losses after Draghi's remarks that weak growth and soft inflation could lead to further rate cuts to historic lows.

He also batted back an accusation from Trump of currency manipulation, saying the ECB's mandate "is price stability".

Oil prices also pushed ahead - sending regional energy firms soaring - after rallying on hopes that a resolution to the trade war would boost demand for the commodity. Brent climbed almost two per cent and WTI almost four per cent on Tuesday.

Investors were also cheered by news OPEC has decided on a date for its next meeting, with hopes the group and its other key producers led by Russia will extend output curbs beyond this month to soak up excess supplies.

"Saudi Arabia is already cutting output ahead of the meeting ... The de facto OPEC leader is also preparing to push for better compliance among producers such as Iraq and Nigeria," ANZ Bank said in a note.

The bank added that the group's Economic Commission Board said it expects global stockpiles to drop by 500,000 barrels a day if producers continue their caps into the second half of the year.

- Key figures around 0810 GMT -

Tokyo - Nikkei 225: UP 1.7 per cent at 21,333.87 (close)

Hong Kong - Hang Seng: UP 2.6 per cent at 28,202.14 (close)

Shanghai - Composite: UP 1.0 per cent at 2,917.80 (close)

London - FTSE 100: DOWN 0.1 at 7,4539.00

Euro/dollar: DOWN at US$1.1197 from US$1.1202 at 2040 GMT

Pound/dollar: DOWN at US$1.2550 from US$1.2558

Dollar/yen: DOWN at ¥108.30 from ¥108.43

Oil - West Texas Intermediate: UP 21 cents at US$54.32 per barrel (new contract)

Brent North Sea: UP 27 cents at US$62.41 per barrel

New York - Dow: UP 1.4 per cent at 26,465.54 (close)