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Asian Stocks and the Yuan Jump on Hopes for a U.S.-China Trade Truce

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11/02/2018 | 01:34am EST

By Mike Bird

HONG KONG--Asian stocks and the Chinese yuan jumped Friday on indications that trade tensions between the U.S. and China are de-escalating, following a phone call between President Trump and his counterpart, Xi Jinping.

A tweet from Mr. Trump about what he called a "long and very good conversation" with Mr. Xi helped kick off the first leg of the rally in Asia. Markets climbed further in the early afternoon as investors became more hopeful that an agreement on trade could be reached by the end of the month.

Hong Kong's Hang Seng Index was up by about 3.5% shortly after the market's midday trading break, after rising nearly 4% earlier.

The Shanghai Composite rose 2.4%, South Korea's Kospi jumped 3.2% and Japan's Nikkei 225 climbed 2.6%.

In foreign exchange markets, the U.S. dollar dropped below 6.9 to the yuan in offshore markets for the first time since Oct. 12, from as high as 6.98 yuan on Thursday. The Chinese currency has drifted close to 7 per dollar in recent days, a level Beijing has, in the past, sought to defend by intervening in currency markets. A dollar now buys 6.898 yuan.

Market gains accelerated after a Bloomberg report said Mr. Trump asked U.S. officials to draft terms of a trade agreement with the Chinese government ahead of a G-20 summit--where the two leaders are expected to meet--at the end of this month.

Markets in Asia have been severely hit by escalations in trade tensions this year. Equity benchmarks in China, Hong Kong and South Korea have entered bear markets, defined as a 20% fall from a recent high.

"While we are still cautious over a full resolution of recent tensions in the medium term, resumption of dialogue between Washington and Beijing would be good enough to investors for now," said Tai Hui, chief market strategist for Asia at J.P. Morgan Asset Management.

News from China also helped lift Asian markets, according to some analysts, after Mr. Xi met with Chinese business leaders this week. He pledged to reduce their tax burdens and offered financial support to private companies, according to the official Xinhua News Agency.

"In short, if you are a China bull, one saw something reassuring there. If you are a China bear, you certainly didn't," said Michael Every, senior Asia-Pacific strategist at Rabobank.

Write to Mike Bird at Mike.Bird@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
CHINA-SHANGHAI COMP 1.42% 2596.01 End-of-day quote.3.93%
HANG SENG 1.33% 27082.01 Real-time Quote.4.78%
KOSPI COMPOSITE INDEX 0.53% 2120.3 Real-time Quote.3.86%
NIKKEI 225 1.27% 20666.07 Real-time Quote.3.25%
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