Asian stocks rose by a large margin on Monday after a warm conversation between Mr. Trump and Chinese president Xi Jinping. The talk which focused on trade, TikTok, and fentanyl has given hope for improving relation between both countries before Trump comes to power.
Markets Show Strong Gains
The Australian, Japanese and South Korean shares advanced from their opening positions due to Wall Street’s performance previously. US-Chinese stocks increased 3.2% on Friday after Trump tweeted about the call with Xi as ‘very good’. However, US futures were slightly lower in Asia trading because Wall Street was shut down on Monday for the Columbus Day holiday.
The respective dynamics were accompanied by positive changes in the Chinese technology industry as well. Social Network Tiktok was back in the US on Sunday after its Chinese parent company was given an extra three months by Trump to find a buyer. It was regarded as a friendly act while the general relationships were tense, which helped to strengthen the investors’ trust.
Expert Perspectives
Kyle Rodda, a senior analyst at Capital.com in Melbourne, highlighted the market reaction:
“The amicable call between Trump and Xi, while only a temporary reprieve amidst irrevocable strategic competition, is extra fuel to reignite bullishness in equities. It’s particularly telling that Asian indices opened firmer today because of the news, despite stronger-than-expected Chinese growth data on Friday.”
Rodda’s comments reflect the broader sentiment that while the Trump-Xi interaction may not signal a long-term thaw in US-China relations, it has temporarily boosted market sentiment.
Challenges on the Horizon
Even though the market displayed optimism to the news, traders should expect squiggly movements as Trump is set to unleash his policy machinery through the executive orders. In his first days in office Trump is expected to take more than 100 executive actions focused on immigration, energy, and deregulation.
Barclays analysts, including Ajay Rajadhyaksha, warned of potential turbulence:
“A hundred executive orders on day one itself – on areas as wide-ranging as border policy, tariffs, energy, deregulation, etc. – is likely to send investors scrambling to decipher them. Financial markets are likely to be volatile in the coming weeks as they absorb the details of the incoming administration’s policies.”
China’s Economic Outlook
Against this backdrop, China’s commercial banks are expected to announce their one- and five-year loan prime rates. Both are predicted to hold steady for a third month due to the pressure on the Chinese Yuan and the People’s Bank of China is reluctant to adjust the policy rates .
The latest obstacle is the still disappointing demand from China, the world’s second-biggest economy. The growth rates published on Friday were above expectations, but their significance for the market was rather small, because the focus on the further development of the country’s economy remained rather concerned.
Looking Ahead
The tensions in the US-Chinese relations and policy direction of the Trump government will be watched closely as the inauguration of Trump draws nearer. While, this positivity due to Trump-Xi relationship has also raised short-term optimism among the analyst there are some long-term worries are not away.
While Asian equities saw a brief spurt, it might largely depend on clarity pertaining to US and China’s trade relationship and economic policies at home and abroad.
