Top US economic officials travel to Beijing this week for the third round of talks on Thursday and Friday, where preparatory talks among deputies were due to start Monday (NICOLAS ASFOURI)

London (AFP) – World stock markets rallied Monday as US and Chinese officials in Beijing geared up for crunch trade talks aimed at averting fresh tariff escalations.

European equities chased Asia higher as efforts to resolve the festering trade row get under way, but sentiment remains clouded by the prospect of another US government shutdown.

London won a boost as a UK economic growth slowdown weighed on the pound, lifting stocks in multinationals that have earnings in foreign currency.

The Brexit-facing British economy grew last year by 1.4 percent, data showed. That was the lowest level for six years and down from 1.8 percent in 2017.

“European stocks have rallied… as traders are hopeful about the next round of trade talks between the US and China,” said CMC Markets analyst David Madden.

“US trade delegates will fly to Beijing to reassume talks. Given that both sides are still far apart, there is no guarantee that the discussions will be successful, and dealers’ optimism might be wishful thinking.”

– ‘Big week’ –

However, Asian equities experienced sizeable gains on Monday on resurgent investor optimism.

“It’s shaping up to be another big week for the United States, with the government on the verge of another shutdown and trade talks continuing with China,” said Oanda analyst Craig Erlam.

“This week the US team will travel to Beijing for what is increasingly looking like deal-saving negotiations.”

Markets had mostly fallen on Friday after a tumultuous week that was dented by continued uncertainty over slowing world economic growth and the global trade war.

Mainland Chinese markets rebounded Monday after the Lunar New Year break despite a bleak IMF warning over the global growth outlook.

Top US economic officials will travel to the Chinese capital this week for the third round of talks on Thursday and Friday, but deputies had already arrived and the White House said preparatory discussions were due to begin Monday.

Failure to agree a deal between the two economic superpowers before March 1 would see punitive US duties on $200 billion in Chinese goods more than double.

Analysts say imposition of the tariffs could further sap the strength of the global economy.

– Storm clouds –

Over the weekend, the International Monetary Fund warned governments to prepare for a possible economic “storm” as growth forecasts dip.

It cited the trade row as one of four “clouds” overshadowing the global economy, along with Brexit uncertainty, the accelerated slowdown in China and financial tightening.

“The bottom-line — we see an economy that is growing more slowly than we had anticipated,” IMF managing director Christine Lagarde told the World Government Summit in Dubai at the weekend.

Looming later this week is the spectre of a repeat of the 35-day partial US government shutdown that ended January 25 — the longest in the country’s history.

Key Republican negotiator Richard Shelby blamed Democrats for another impasse over immigration, in talks that have been defined by US President Donald Trump’s demand for funds for a border wall.

 – Key figures around 1130 GMT –

London – FTSE 100: UP 0.5 percent at 7,104.32 points

Frankfurt – DAX 30: UP 0.8 percent at 10,989.21

Paris – CAC 40: UP 0.8 percent at 5,002.86

EURO STOXX 50: UP 0.8 percent at 3,161.03

Hong Kong – Hang Seng: UP 0.7 percent at 28,143.84 (close)

Shanghai – Composite: UP 1.4 percent at 2,653.90 (close)

Tokyo – Nikkei 225: Closed for a public holiday

New York – Dow: DOWN 0.3 percent at 25,106.33 (close)

Euro/dollar: DOWN at $1.1316 from $1.1323

Dollar/yen: UP at 110.13 yen from 109.73

Pound/dollar: DOWN at $1.2924 from $1.2944 at 2200 GMT Friday0

Euro/pound: UP at 87.55 pence from 87.40 pence

Oil – Brent Crude: DOWN 10 cents at $62.00 per barrel

Oil – West Texas Intermediate: DOWN 44 cents at $52.28

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