After a few weeks of cut and thrust between the US and China, some conciliatory words came from both sides.
During his speech early Tuesday morning at the Boao Forum for Asia, China President Xi’s pledged to allow foreign companies greater access to China’s financial and manufacturing sectors, and signalled lower tariffs on cars in a move to neutralise a damaging trade war with the US.
Currently when a car is sent to the United States from China, there is a tariff of 2 1/2% to be paid. However, when a car is sent to China from the United States, there is a tariff of 25% to be paid.
“Going forward, we will reduce as soon as possible limits on foreign investment in these industries, cars in particular,” Mr Xi said. “This year we will significantly lower import tariffs for vehicles and reduce import tariffs for some other products. We will work hard to import more products that are competitive and needed by our people,” he added.
Furthermore, China on Tuesday asked the World Trade Organisation to mediate in its dispute with the US over tariffs on steel and aluminium imports, which Beijing claim to contradict WTO agreements. China has requested WTO dispute consultations with the US, which give both parties a chance to resolve the dispute without resorting to litigation.
From his end, President Trump noted “very thankful for President Xi’s kind words on tariffs and automobiles barriers…we’ll make great progress together”.
That generally softer rhetoric translated in a buy trend of US companies as well as companies exposed to the US, with the S&P 500 eventually closing Tuesday night up +1.67%. This was the first time since the beginning of March that the S&P 500 started the week with two consecutive days of gains.
In the automotive sector General Motors was up 3.3% at the highest level in one month, Fiat Chrysler was quite flat (-0.05%) although overall it recovered 8.6% since one month ago and Daimler was up 1.2%.
In the equipment manufacturing industry, Caterpillar and Deere &Co both gained 3.5% and Prysmian was up 2.3%.
This conciliatory effect spread to Europe with the DAX up 1.1% (one month high) and the FTSE MIB up 0.52%. In Australia, the S&P/ASX 200 rose 0.8 per cent to a two-week high of 5,857 points. Hong Kong’s Hang Seng Index rallied 1.7 per cent, as did Shanghai’s composite index, with Chinese banks among the sharpest risers. The Shenzhen composite index was up 0.5 per cent.
Disclaimer:
This article was issued by Elisabetta Gaudiano, research aAnalyst at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as a personal recommendation/ investment advice including tax and legal advice.