European stock markets soar on China-US trade war truce

Logo of the London Stock Exchange.

Wall Street opened with a strong 1.6 per cent rise in early trading as the Dow Jones Industrial Average motored to 25,956.88, joining a rally kicked off in Asia and maintained in Europe - though most major markets gave up around half of their early gains.

Mid-session the Dow's gain had shrunk to 0.6 per cent while Frankfurt, London and Paris, who had taken their cue from strong rises in Hong Kong and Shanghai, saw early gains of around two per cent slide to 1.8, 1.2 and 1.0 respectively by the close.

"Global stocks are starting the week in impressive fashion, with news of a breakthrough in talks between the US and China providing a boost," said IG analyst Joshua Mahony.

In a much-anticipated weekend meeting between Donald Trump and Xi Jinping, the heads of the world's two biggest economies hammered out a deal that will see them hold off on their tit-for-tat tariffs row, which has roiled global equities for months.

TEMPORARY TRUCE DOUBTS

The US will not raise levies on Chinese goods on Jan 1 while China promised to buy more from the US and enter a 90-day period of talks to bring an end to the dispute.

If the negotiations fail, the US tariffs will jump from 10 per cent now to 25 per cent.

Capital Economics sounded a note of caution after Trump had hailed an "amazing and productive" weekend meeting with the Chinese president. The US leader said it offered "unlimited possibilities for both the United States and China".

For Capital Economics, "we doubt that the ceasefire agreed between Presidents Trump and Xi in Buenos Aires will mark a real turning point in the trade war. Particularly contentious issues, like intellectual property rights and market access, have yet to be addressed, and we wouldn't be surprised if no agreement is reached in the 90-day period during which the US has pledged to suspend its previously-planned tariff increases."

OIL REBOUNDS

Oil prices, battered by concerns the trade war would hit demand for the commodity, rebounded on the truce news - but like share prices, early gains soon lost momentum.

Adding to the buying support was President Vladimir Putin saying on Saturday that Russia and Saudi Arabia had agreed to renew a pact on production cuts.

Both Brent crude and WTI initially climbed around five per cent, boosting regional energy firms - PetroChina was up more than four per cent in Hong Kong and Woodside Petroleum up 3.5 per cent in Sydney as traders looked ahead to a weekend meeting of OPEC and key non-OPEC members, where they are expected to announce how much they will cut and for how long.

Price gains of more than two dollars a barrel were pared back after Qatar said it would leave OPEC next year as it looks to concentrate on its gas production, though it would continue to pump crude.

Although the country contributes a fraction of cartel's output, the move may have wider political implications given Doha's tense relations with Riyadh.

Ahead of the upcoming OPEC meeting on Thursday in Vienna, Bjarne Schieldrop, chief commodities analyst at SEB, the leading Nordic corporate bank, said he believed continued cooperation would lead to oil prices remaining above US$60 a barrel.

Key figures around 1200 GMT:

New York - Dow Jones: UP 0.6 per cent at 25,703.48

London - FTSE 100: UP 1.2 per cent at 7,062.41 points (close)

Frankfurt - DAX 30: UP 1.8 per cent at 11,465.46 (close)

Paris - CAC 40: UP 1.0 per cent at 5,053.98 (close)

Milan - FTSE MIB - UP 2.2 per cent at 19,622.36 (close)

EURO STOXX 50: UP 1.6 per cent at 3,218.06

Tokyo - Nikkei 225: UP 1.0 per cent at 22,574.76 (close)

Hong Kong - Hang Seng: UP 2.6 per cent at 27,182.04(close)

Shanghai - Composite: UP 2.6 per cent at 2,654.80 (close)

Oil - West Texas Intermediate: UP US$1.33 at US$52.26 per barrel

Oil - Brent Crude: UP US$1.39 at US$60.85 per barrel

Euro/dollar: UP at US$1.1358 from US$1.1317

Dollar/yen: UP at 113.54 yen from 113.57

Pound/dollar: DOWN at US$1.2740 from US$1.2749 at 2200 GMT