If it was a rally in the yuan and Chinese equities you were hoping for following the trade truce struck on Saturday evening between Donald Trump and Xi Jinping, you were not disappointed.
Although there’s rampant tomato throwing from the peanut gallery regarding the extent to which the interim truce is nebulous and unlikely to prove sustainable after the initial 90-day ceasefire, that didn’t matter on Monday.
The yuan logged its largest one-day gain since February 2016, vindicated those who had positioned for a bounce headed into the weekend.
(Bloomberg)
USDCNH vol. sold off hard.
(Bloomberg)
In equities, onshore shares put up outsized gains, as expected. It looks like some of the auto dealers logged especially good days on the heels of Trump’s car tariffs tweet. “China has agreed to reduce and remove tariffs on cars coming into China from the U.S.”, Trump tweeted just before midnight in the U.S. Here are a couple of the names that spiked on the news:
(Bloomberg)
Remember, there are widespread concerns about consumer demand in China and part of the issue is auto sales.
Read more
Forget Trade, This May Be The Biggest Threat To China’s Economy
More broadly, the CSI 300 jumped nearly 3% on the session as investors piled in on the trade euphoria. It was the best day in weeks.
(Bloomberg)
Meanwhile, in Hong Kong, the Hang Seng had its best day since November 2. If that date sounds familiar to you, it should. That was the day when Hong Kong shares (and South Korean shares, for that matter), logged their largest single-session gains in seven years on the heels of Trump’s “very good, very long” Xi phone call tweet and subsequent report from Bloomberg that the President had instructed aides to draft a truce to present to Xi.
(Bloomberg)
All in all, this is a testament to just how anxious the market was for good news on the trade front. The only question now is how durable this proves to be.
Read more
With The 90-Day Clock Now Ticking, Goldman Weighs In On Odds Of A Real Trump-Xi Trade Deal
Why One Bank Thinks Trade Truce Will Give China More Leverage
