Global stocks rally on US-China trade optimism

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Global markets have rallied on hopes that Donald Trump and Xi Jinping will agree to extend a trade truce during a high-stakes meeting in South Korea this week.

Japan’s Nikkei 225 index surged past 50,000 for the first time in its history on Monday, while South Korea’s Kospi climbed more than 2 per cent to a record high.

Futures for the S&P 500 and Nasdaq Composite rose 0.7 per cent and 1 per cent, respectively. Euro Stoxx 600 futures climbed 0.4 per cent. China’s CSI 300 index rose 0.7 per cent and Hong Kong’s Hang Seng index gained 0.9 per cent.

Gold prices fell 1 per cent to $4,071 a troy ounce as demand for safe-haven assets weakened. Bitcoin prices rose 1.4 per cent to $114,921 a token, extending a rally over the weekend.

US officials expect China to delay introducing export controls on rare earths in the wake of the weekend’s trade talks in Malaysia. Hopes of an extension to a truce expected to expire next month had lifted equities across Asia, said Wee Khoon Chong, a senior strategist at BNY. “Everything is pointing to sentiment getting a little bit better.”

The Nikkei’s gains were also fuelled by optimism around new Prime Minister Sanae Takaichi’s growth policies.

The Nikkei, made up of blue-chip names, had performed better than the broader Topix, which includes many hundreds of small companies. The performance indicated that the rally was being driven by foreign investors, said Neil Newman, Japan equity strategist at Astris Advisory.

“I think that 60,000 by next summer is entirely doable . . . The rate that the market is moving is something we haven’t seen since the big Abenomics rally 10 years ago. It is all looking very stretched but there is real momentum,” said Newman.

Nicholas Smith, Japan equity strategist at CLSA, said: “Breaking the Big Five-Oh captures the changing of the zeitgeist: breaking 40 last year smashed the curse of the glass ceiling, but the 62 per cent rise from this year’s lows screams that, for the first time in a generation, Japan’s again a place where you can really make money.”

The Nikkei rally — led by a 7.1 per cent rise for defence manufacturer Kawasaki Heavy Industries — followed Friday’s policy speech by Takaichi in which she set out plans to stimulate economic growth and accelerate an increase in defence spending.

That announcement came ahead of Trump’s visit to Japan this week and what are expected to be strenuous efforts by Takaichi to bolster the US-Japan alliance and strike up a friendship with the American president.

BNY’s Chong said equities in Japan were likely to continue rallying. “We are probably going to see new highs for many days to come,” he said. “I don’t think this is the end just yet.”

Monday’s rally came after US markets hit fresh records on Friday following lower-than-expected inflation numbers.