Optimism over easing of US-China trade dispute infects markets

Hopes that China and the US can resolve their trade row has provided support to markets

Optimism over signs that China and the United States will start working to resolve their trade dispute helped stock markets across the world move higher on Monday.

"Equity markets are buoyant ahead of the US-China trade talks which commence on Wednesday," said market analyst David Madden at CMC Markets UK.

The talks slated for Wednesday and Thursday are the first since the US and China began slapping tariffs on tens of billions of dollars worth of goods, and according to the Wall Street Journal they are aimed at easing the dispute so US President Donald Trump and Chinese President Xi Jinping can hold a summit in November.

"Investors will be hoping that negotiations between China and the US can start to break the trade tariff deadlock or at the very least open the door to a summit between President Trump and President Xi, which might begin to ease the pressure," noted Rebecca O'Keeffe, head of investment at Interactive Investor.

A possibility that the months-long row which has battered world markets could be brought to an end was enough to spur optimism on trading floors.

London closed the day 0.4 percent in afternoon trading, with Paris adding 0.7 percent and Frankfurt climbing 1.0 percent.

On Wall Street, the Dow was 0.3 percent higher in late morning trading.

In Asia, both Hong Kong and Shanghai closed more than one percent higher.

Greg McKenna, chief market strategist at AxiTrader, pointed out that Beijing, which is struggling to support the economy while also addressing a debt mountain, may have had a "lightbulb moment" last week with the release of more weak data and a sharp drop in the troubled yuan.

Authorities in China appeared to be moving to support the yuan last week as it headed towards seven to the dollar, its weakest level since January 2017.

Some observers have suggested the central bank has been letting the yuan soften in recent weeks to offset the effects of any US tariffs, a claim China has denied.

Elsewhere Monday, the Turkish lira was hovering above six to the dollar, well off the record levels around seven seen last week but still facing pressure after Ankara and Washington traded fresh sanctions threats as the row over a detained American pastor drags on.

Ratings agency Standard & Poor's on Friday downgraded Turkey's sovereign debt for the second time in four months and warned of a recession in 2019.

"The worry over Turkey's currency crisis eased slightly last week as the lira rebounded against the US dollar. But this isn't the end of the problem," said Masayuki Kubota, chief strategist at Rakuten Securities.

"The harder the Turkish government finds it to borrow money, the harder it will be for Turkish banks to raise funds, and it would not be a surprise if the country’s banks were hit with downgrades themselves," said Madden at CMC Markets UK.

Attention this week turns also to the annual central bankers' symposium at Jackson Hole in Wyoming, which will be followed for clues on US interest rate plans among other issues.

- Key figures around 1530 GMT -

New York - Dow Jones: UP 0.3 percent at 25,754.12 points

London - FTSE 100: UP 0.4 percent at 7,591.26 (close)

Frankfurt - DAX 30: UP 1.0 percent at 12,331.30 (close)

Paris - CAC 40: UP 0.7 percent at 5,379.65 (close)

EURO STOXX 50: UP 0.7 percent at 3,395.64

Tokyo - Nikkei 225: DOWN 0.3 percent at 22,199.00 (close)

Hong Kong - Hang Seng: UP 1.4 percent at 27,598.02 (close)

Shanghai - Composite: UP 1.1 percent at 2,698.47 (close)

Euro/dollar: DOWN at $1.1439 from $1.1441 at 2100 GMT Friday

Pound/dollar: UP at $1.2763 from $1.2749

Dollar/yen: DOWN at 110.45 from 110.57 yen

Dollar/Turkish lira: UP at 6.17 lira from 6.03 lira

Oil - Brent Crude: UP 40 cents at $72.23 per barrel

Oil - West Texas Intermediate: UP 22 cents at $66.13