Global markets are surging after reports Trump is ready to back down in his trade war with China

  • News of potential trade breakthrough between the United States and China has sent stocks across Asia and Europe sharply higher, while U.S. futures are rallying.
  • China’s benchmark Shanghai Composite Index had jumped 2.7%, Hong Kong's Hang Seng is up even more.
  • The rally has extended into Europe, with major indexes gaining more than 1% in the first hour of trade. It looks set to continue when US markets open as well, with Dow futures pointing to a 0.9% rise at the open.
  • The news follows a series of positive remarks offered by Donald Trump and Xi Jinping in relation to trade negotiations on Thursday.
  • You can follow what's going on in global stock markets at Markets Insider.

Stocks around the world are rallying sharply on Friday after reports of a potential trade breakthrough between the United States and China was a catalyst to counter the brutal sell-off which characterised markets in October.

According to Bloomberg, US President Donald Trump has asked key officials to begin drafting potential terms of a trade agreement with China, saying Trump is interested in reaching an agreement on trade with Chinese President Xi Jinping at the G20 summit in Argentina at the end of the month.

On top of an apparent easing in trade tensions on Thursday, the news has been welcomed by investors across the region, especially in China — which has so far this year seen its major indexes lose 30% or more of their value. October was especially brutal in stock markets — after a string of sharp sell-offs, last month was the worst month on for the S&P 500 in seven years.

See more related to this story:

19 PHOTOS
Impact of trade tensions between US and China
See Gallery
Impact of trade tensions between US and China

Head chef Liang Xin poses with a piece of beef imported from the U.S. in the kitchen at Wolfgang's, a high-end steak house in East Beijing's Sanlitun district, China, April 6, 2018. Liang said U.S. beef has always been limited in China, so he doesn't know how customers would react if the restaurant has to raise prices.

(REUTERS/Thomas Peter)

Liu Anqi rolls dough in flour made from imported grain at the baking studio she runs with friends, in Beijing, China, April 12, 2018. Liu has just opened a bakery in Beijing with her friend. She also teaches customers how to make cakes with a brand of flour that uses only wheat from the United States and Canada. "Flour is one of the most important ingredients in baking and its quality varies with different brands," Liu said, adding that finding a new brand would be time-consuming and higher taxes on this wheat would force her to raise cake prices and tuition fees, which could turn customers away. 

(REUTERS/Thomas Peter)

A detail of the Harley-Davidson brand name is photographed on the motorcycle of Guo Qingshan in his village outside Beijing, China, April 7, 2018. "I love the sound of the engine and the muscle of the motor. When I ride it, I feel free and proud," Guo said. However, Guo has his limits. If prices rise, Guo said he wouldn't contemplate buying another Harley. 

(REUTERS/Thomas Peter)

Fried vegetables are seen in the kitchen of the restaurant where chef Liu Ming works, in Beijing, China, April 11, 2018. Liu said the oil that his restaurant uses is produced with soybeans imported from the United States, and the business won't change the brand even if prices rise. "We use this oil because it gives the food a bright colour and does not leave a strange smell or taste," he said. "We don't know what will happen to our dishes if we change the oil."

(REUTERS/Thomas Peter)

Xie Guoqiang, who runs the Vin Place wine and liquors store, poses for a photograph inside the shop in Beijing, China, April 10, 2018. Xie said in an interview that the tariffs would have little impact on his business, as the shop mostly imports wine and liquors from France, Chile, Austria and Argentina.

(REUTERS/Damir Sagolj)

A bottle of Jack Daniel's Tennessee whiskey is seen on a shelf at the Vin Place wine and liquors store in Beijing, China April 10, 2018. Xie Guoqiang, who runs Vin Place, said in an interview that the tariffs would have little impact on his business, as the shop mostly imports wine and liquors from France, Chile, Austria and Argentina.

(REUTERS/Damir Sagolj)

Liu Ming, a chef at a Sichuan restaurant in Beijing, poses for a picture at the back door of the kitchen where he works in Beijing, China, April 11, 2018. Liu said the oil that his restaurant uses is produced with soybeans imported from the United States, and the business won't change the brand even if prices rise. "We use this oil because it gives the food a bright colour and does not leave a strange smell or taste," he said. "We don't know what will happen to our dishes if we change the oil." 

(REUTERS/Thomas Peter)

Liu Anqi uses flour made from imported grain at the baking studio she runs with friends, in Beijing, China, April 12, 2018. Liu has just opened a bakery in Beijing with her friend. She also teaches customers how to make cakes with a brand of flour that uses only wheat from the United States and Canada. "Flour is one of the most important ingredients in baking and its quality varies with different brands," Liu said, adding that finding a new brand would be time-consuming and higher taxes on this wheat would force her to raise cake prices and tuition fees, which could turn customers away. 

(REUTERS/Thomas Peter)

A bottle of oil is seen in the kitchen of the restaurant where chef Liu Ming works, in Beijing, China, April 11, 2018. Liu said the oil that his restaurant uses is produced with soybeans imported from the United States, and the business won't change the brand even if prices rise. "We use this oil because it gives the food a bright colour and does not leave a strange smell or taste," he said. "We don't know what will happen to our dishes if we change the oil." 

(REUTERS/Thomas Peter)

Zang Yi poses for a picture as her Tesla car is charging at a charging point in Beijing, China, April 13, 2018. Zang said if the trade tensions resulted in pricier U.S. imports, she wouldn't consider American brands when the time comes to buy a new car. "With the tariff, I would have to pay tax of 100,000 yuan to 200,000 yuan if I were to buy a new Tesla," she said. 

(REUTERS/Thomas Peter)

Zang Yi charges her Tesla car at a charging point in Beijing, China, April 13, 2018. Zang said if the trade tensions resulted in pricier U.S. imports, she wouldn't consider American brands when the time comes to buy a new car. "With the tariff, I would have to pay tax of 100,000 yuan to 200,000 yuan if I were to buy a new Tesla," she said. 

(REUTERS/Thomas Peter)

A Chinese woman tastes wine during a wine seminar in Beijing, China, April 14, 2018.

(REUTERS/Thomas Peter)

Shan Yuliang, salesperson at a cigarette and wine shop, poses with a carton of Marlboro cigarettes in Beijing, China, April 8, 2018. "The moment I saw the news about the trade war on the internet, I felt something big was coming. Previously I would not think about what brand to buy. Now I will give it a second thought and avoid buying American products to defend my country," Shan said. 

(REUTERS/Thomas Peter)

Wine tasting teacher Li Yangang poses for a picture during a wine seminar in Beijing, China, April 14, 2018. Li said in an interview that reduced sales of American wine in China would not hurt the local market because of its relatively small market share. "Australian wine and French wine would have a bigger impact," he said. 

(REUTERS/Thomas Peter)

Cartons of Marlboro cigarettes are seen stacked up on a shelf between Chinese cigarettes at a cigarette and wine shop in Beijing, China, April 8, 2018. 

(REUTERS/Thomas Peter)

Student He Bingzhang lights a Marlboro cigarette in Beijing, China, April 8, 2018. "I don't think the trade war would change my behaviour. I don't smoke a lot, probably one pack a month. Even if it costs 100 yuan, I would still buy Marlboro because it is affordable," He said. 

(REUTERS/Thomas Peter)

Student He Bingzhang poses for a picture as he smokes a Marlboro cigarette in Beijing, China, April 8, 2018. "I don't think the trade war would change my behaviour. I don't smoke a lot, probably one pack a month. Even if it costs 100 yuan, I would still buy Marlboro because it is affordable," He said. 

(REUTERS/Thomas Peter)

Guo Qingshan poses on his Harley-Davidson motorcycle in his village outside Beijing, China, April 7, 2018. "I love the sound of the engine and the muscle of the motor. When I ride it, I feel free and proud," Guo said. However, Guo has his limits. If prices rise, Guo said he wouldn't contemplate buying another Harley. 

(REUTERS/Thomas Peter)

Beef imported from the U.S. is seen at Wolfgang's, a high-end steak house in East Beijing's Sanlitun district, China, April 6, 2018. A 15-kg whole cut of beef from the United States is around 20 percent more expensive than its Australian counterpart, said Daniel Sui, deputy general manager at Wolfgang's. "Customers like U.S. beef because it tastes juicy and tender, but Wolfgang's only sells around seven to eight pieces of U.S. imported beef steak each day," Sui said. "The limited supply is because the Chinese government bans feed additives and only 5 percent of U.S. beef is qualified for export." 

(REUTERS/Thomas Peter)

HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE

"The trade war has been partly to blame for the recent equities rout, so any signs that the two powers are making progress will encourage investors to put risk back on the table and pick up stocks at bargain levels," Jasper Lawler, head of research at London Capital Group said in an email.

Friday's rebound saw the benchmark Shanghai Composite Index soar 2.7%, while the Hang Seng in Hong Kong has jumped by an even larger 4.2%.

Those gains have continued into the European morning, with stocks across the continent rallying, and looking set for a major gain over the week, as indexes bounce back from the October horror show. By 8.45 a.m. GMT (4.45 a.m. ET), major indexes in continental Europe are broadly higher by more than 1%, with the Euro Stoxx 50 index jumping 1.1%.

The only country missing out on Friday's bounce is the UK, with the FTSE 100 lagging behind on the back of a major rally in the pound on Thursday. When the pound rises, the FTSE tends to fall as the majority of companies on the index denominate their earnings in dollars, so a stronger pound is a negative for them.

With Europe bouncing, it also appears that markets in the US are ready to rebound. Futures point to all three major US indexes opening higher later on Friday, with the Dow Jones pointing to a 0.85% gain at the open.

US stocks could get a further boost when the latest data on non-farm payrolls is released at 8:30 a.m. in Washington (12.30 p.m. in London).

Job growth likely rebounded in October, with wages expected to gain the most in 9-1/2 years, pointing to further labor market tightening that could encourage the Federal Reserve to raise interest rates again in December. Economists predict that the unemployment rate is expected to stay at a 49-year low of 3.7%, while payrolls probably increased by 190,000 jobs

Analysts urged caution, however.

"This remains a fragile situation, but it appears to have turned a corner, providing a floor to the recent equity selloff," Lawler said. "Whilst talks are on a positive note we don’t expect to see a repeat of those extreme bouts of selling that we saw across October."

News of Trump asking officials to draft new trade terms came shortly after the president tweeted that he had a "long and very good conversation with President Xi Jinping of China."

"We talked about many subjects, with a heavy emphasis on Trade. Those discussions are moving along nicely with meetings being scheduled at the G-20 in Argentina," he said.

According to Chinese state media, Xi Jinping also said on Thursday that he hopes "China and the United States will be able to promote a steady and healthy relationship."

"The two countries’ trade teams should strengthen contact and conduct consultations on issues of concern to both sides, and promote a plan that both can accept to reach a consensus on the China-US trade issue," Xi said, according to CCTV state television.

Business Insider Australia's David Scutt contributed reporting.

NOW WATCH: Wikipedia founder Jimmy Wales: There's going to be an 'enormous backlash' against Donald Trump's lies

See Also:

SEE ALSO: Traders betting against FAANG stocks have made $5.5 billion during the brutal October sell-off

Read Full Story
  • DJI25628.90-623.30-2.37%
    NASDAQ7751.77-239.62-3.00%
  • NIKKEI 22520261.04-449.87-2.17%
    Hang Seng25394.06-785.27-3.00%
    DAX11611.51-135.49-1.15%
  • USD (PER EUR)1.120.00060.06%
    USD (PER CHF)1.03-0.0009-0.09%
    JPY (PER USD)105.28-0.1060-0.10%
    GBP (PER USD)1.23-0.0006-0.05%