JSE set to benefit from ceasefire between Trump and Xi

Agreement not to hike tariffs and the relaxation of some Huawei bans have exceeded the market expectation, analysts say

01 July 2019 - 07:52 Nick Hedley

Xi Jinping and Donald Trump. Picture: REUTERS

SA stocks could benefit on Monday from an agreement by US President Donald Trump and Chinese leader Xi Jinping to resume trade talks.

At the G20 summit in Japan at the weekend, Trump and Xi agreed in principle to restart trade talks. Under the agreement, the US will not impose new tariffs on Chinese goods and will lift some restrictions on Huawei, while China will buy more agricultural goods from America.
“The Osaka outcome that agreed no higher tariffs would be imposed, and the relaxation of some Huawei bans, [have] slightly exceeded the market expectation…” analysts at Barclays Research said in a note.
Although the resumption of trade talks “may revive some hopes of reaching a deal, possibly by mid-November when the two leaders potentially meet at the Asia-Pacific Economic Co-operation summit in Chile, we do not think the likelihood of a deal has necessarily increased”.
Trade talks will be largely dictated by Trump’s strategy leading up to the 2020 US election, Barclays Research said.
US stock futures pointed to a positive start on Monday, while equities in Asia were mostly higher amid an improvement in risk appetite, despite disappointing Chinese manufacturing data. The Shanghai Composite index surged 1.9% on Monday morning, and Japan’s Nikkei 225 rose 2%.
Singapore’s main benchmark added 1.3%, while Korea’s Kospi was flat and Hong Kong’s Hang Seng Index edged 0.3% lower amid protests in the Chinese special administrative region. Australia’s main benchmark added 0.4%.
Internet and gaming giant Tencent, which influences the JSE via major shareholder Naspers, was flat in Hong Kong.
JSE-heavyweight BHP Group was 01% up in Australia.
No major company results are expected in SA on Monday.
New vehicle sales figures and business confidence data are due locally, while manufacturing readings are expected in the UK, US and the EU.
New vehicle sales growth is expected to have contracted 4.5% year on year in June following a decline of 5.8% year on year in May, according to Investec economist Kamilla Kaplan.
Passenger and commercial vehicle sales have disappointed so far in 2019, reflective of “particularly low business and consumer confidence levels” and a weak economy, Kaplan said.
The rand was firmer on Monday morning at R14.07/$, R17.86/£, and R15.95/€.