Traders work on the floor at the New York Stock Exchange in New York City, the US. Picture: REUTERS/BRENDAN MCDERMID
Traders work on the floor at the New York Stock Exchange in New York City, the US. Picture:  REUTERS/BRENDAN MCDERMID

Sydney/Tokyo — Asian shares rallied on Monday after US and Chinese leaders brokered a truce in their trade conflict, a relief for the global economic outlook and a tonic for emerging markets.

Trade-exposed currencies led the early gains, with the Australian dollar notching a four-month peak, while the dollar dropped to one-month lows against the yuan.

E-mini futures for the S&P 500 climbed as much as 1.9%. MSCI’s broadest index of Asia-Pacific shares outside Japan was up 1.8%.

China’s CSI300 index of Shanghai and Shenzhen shares rose 2.6%. In Japan, Nikkei gained 1.3% to a six-week high.

“Markets are opening with a knee-jerk boost to risk appetite but time will tell how enduring the optimism proves to be,” said ANZ economist Jo Masters. “There are already very different official takes on what was achieved at the meeting.”

“But for now, both sides can claim a win,” she said. “Perhaps not insignificantly, it provides a window to export the soybean crop from key Republican states, at least.”

China and the US agreed to halt additional tariffs in a deal that keeps their trade war from escalating as the two sides try again to bridge their differences with fresh talks aimed at reaching a deal within 90 days.

The White House said on Saturday that President Donald Trump told Chinese President Xi Jinping during high-stakes talks in Argentina that he would not boost tariffs on $200bn of Chinese goods to 25% on January 1 as previously announced.

“Deeply contentious thornier structural issues such as forced technology transfer remain unresolved,” cautioned Westpac forex analyst Robert Rennie.

“This US-China agreement is thus better characterised as a ‘mini-breakthrough’ that puts a momentary pause on trade tensions rather than a comprehensive policy deal.”

Investors chose to see the glass as half full and lifted the Aussie dollar 0.75% to $0.7360.

The greenback eased against a basket of currencies to 96.993, but also firmed on the yen to ¥113.57. The euro added 0.3% to $1.1345.

The Mexican peso jumped more than 1% to 20.185 , helped also by reports that newly sworn-in Mexican President Andres Manuel Lopez Obrador may reverse his earlier plan to cancel construction of a new airport in the country’s capital.

The dollar had come under pressure last week when comments by Federal Reserve chair Jerome Powell were interpreted by markets as hinting at a slower pace of rate hikes.

Powell was scheduled to testify on Wednesday to a congressional joint economic committee. But the hearing is expected to be postponed to Thursday because major exchanges will be closed on Wednesday in honour of former US president George HW Bush, who died on Saturday at the age of 94.

Treasuries rallied hard late on Friday to leave 10-year yields down at 2.99% before bouncing back to 3.035% early on Monday.

The progress on China-US trade and an easier dollar could provide some support to commodity prices.

Oil posted its weakest month in more than 10 years in November, losing more than 20% as global supply outstripped demand.

Speculation is high that producer cartel Opec and Russia will agree some form of production cut at a meeting in Vienna on Thursday.

Brent futures rose $2.40 to trade at $61.86 a barrel, while US crude gained $2.28 to $53.21.