Global stocks pushed higher and the dollar weakened on Monday ( June 1st ) , after Donald Trump’s latest escalation of his dispute with China fell short of traders’ worst fears. European markets rose, as the FTSE 100 and CAC 40 each gained about 1.5 per cent in the first hour of trading. The moves take the Stoxx Europe 600, a composite index of the region’s largest companies, within sight of three-month highs.
Speaking after markets closed in Asia and Europe on Friday, Mr Trump said he would revoke special trade privileges for Hong Kong in retaliation for Beijing’s decision to impose a controversial security law on the former British colony. But he failed to unveil any specific measures against the financial hub, and analysts said the phase-one trade deal with China appeared safe for now. “China’s response to [the] US around the Hong Kong issue [will] probably be mild and [the] US-China phase-one deal is likely to hold,” added Johanna Chua, chief Asia-Pacific economist at Citigroup. Hong Kong “protests have been on a smaller scale since the news of the national security law, which also helps soothe market sentiment”. Shares in Hong Kong and mainland China jumped on Monday in the first day of trading after the US president spoke. Hong Kong’s Hang Seng index rallied 3.4 per cent while China’s CSI 300 gauge of Shanghai- and Shenzhen-listed shares added 2.7 per cent, as investors deemed that Mr Trump had pulled his punches in a press conference on Friday. China’s onshore traded renminbi added 0.3 per cent to trade at 7.1157 per dollar. The dollar index, which tracks the greenback against a basket of currencies, lost 0.3 per cent. “Market participants are relieved that President Trump did not announce more meaningful policy actions to hit back at China at last Friday’s press conference,” said Lee Hardman, a currency analyst at MUFG. “While President Trump’s speech was heated in rhetoric, it lacked specific measures that would directly impact China,” he added. Futures trade pointed to gains of 0.3 per cent for the S&P 500 on Wall Street, after the US benchmark reversed earlier losses to close up 0.5 per cent after Mr Trump spoke on Friday. Investor sentiment in mainland China was also supported on Monday by data that showed manufacturing activity in the country expanded in May for the first time since January.
The results of the Caixin-Markit purchasing managers’ index, however, indicated that the global effects of the coronavirus pandemic would continue to weigh on exports from the world’s second-largest economy. Iris Pang, chief economist for Greater China at ING, said China’s recovery “should take a long time” due to weak global demand. Elsewhere in Asia, Japan’s Topix added 0.3 per cent on Monday while South Korea’s Kospi index rose 1.8 per cent. In Australia, the S&P/ASX 200 gained 1.1 per cent. Oil prices slipped with Brent crude, the international benchmark, dropping 0.2 per cent to trade at $37.79 a barrel. WTI, the US marker, was down 0.1 per cent to $35.45. US government bonds slipped slightly, as the yield on the 10-year Treasury rose 0.025 percentage points to 0.6689 per cent.