HONG KONG: Most markets rose on Tuesday (May 20) as risk appetite returned following the previous day’s US rating-fuelled losses, with sentiment also boosted after China cut interest rates to historic lows.
The rally tracked advances on Wall Street, where the initial selloff sparked by Moody’s removal of Washington’s triple-A grade soon gave way to a push back into beaten-down equities amid hopes about US trade talks.
After Donald Trump’s Apr 2 tariff blitz sowed global turmoil, the deal between China and the United States last week – which slashed eye-watering tit-for-tat levies – has re-energised dealers and pushed most markets back to levels before the US president’s “Liberation Day” duties.
Trump suspended his harshest measures for 90 days until mid-July, and while few solid agreements have been reached so far there is optimism that the worst of the crisis has passed.
Still, China caused a little concern after it accused Washington of violating their tariff deal in Geneva this month following a US warning that using Huawei’s AI chips anywhere in the world would break its export controls.
Beijing called for a correction and warned of measures if the White House continued.
Traders are also hoping the Federal Reserve will cut interest rates this year, with two reductions expected, according to Bloomberg News.
However, two central bank officials remained cautious about when to resume their monetary easing, amid worries that the tariffs and possible tax cuts will reignite inflation.
New York Fed boss John Williams indicated decision-makers might not be able to move before September, while the central bank’s vice chairman Philip Jefferson urged patience, adding that it was crucial to make sure any price increases do not become entrenched.
Hong Kong stocks rose more than 1 per cent, while Shanghai, Tokyo, Sydney, Singapore, Taipei, Bangkok, Wellington and Jakarta were all up.
London, Paris and Frankfurt were also well up in morning exchanges.
However, Neil Wilson at Saxo markets warned that traders were not yet out of the woods as US Treasury yields remain elevated.
“Markets are clearly perturbed by ongoing trade uncertainty, economic policy uncertainty and the potential to lock in sweeping tax cuts in the US, undermining the fiscal position further,” he wrote in a commentary.
“The question now is what policy moves can be engineered to tame yields, which could be a worry for equity markets.”
