US President Donald Trump said China trade talks were going well and a deal deadline could be extended (MANDEL NGAN)

London (AFP) – Global stock markets gained ground Wednesday on hopes of progress in the US-China trade spat.

The dollar rose, and oil prices rallied on production cuts by OPEC kingpin Saudi Arabia, which was followed by the United Arab Emirates and Kuwait.

The pound weakened after official data showed UK inflation hit a two-year low and the Brexit impasse dragged on without a breakthrough in sight.

In the United States, President Donald Trump said he might extend his trade deal deadline with Beijing, while a report claimed his Chinese counterpart Xi Jinping would meet top US officials, seeming to boost the prospects of an agreement.

High-level talks are to begin in the Chinese capital Thursday in a bid to ward off sharp US tariff hikes that could harm the global economy.

Trump said he could let his March 1 tariff deadline “slide for a little while” if the two sides were close to a meaningful deal, adding that he expects a summit with President Xi “at some point”.

A report in the South China Morning Post said Xi would personally meet the US delegation in Beijing, suggesting a redoubled effort to make progress on a deal.

Washington is demanding changes from Beijing on what it says are unfair commercial practices. An agreement would stop US tariffs more than doubling on $200 billion in Chinese imports next month. 

Tokyo stocks added a further 1.3 percent after Tuesday’s gains to finish at a two-month high.

Hong Kong rose 1.2 percent, and Shanghai earned 1.8 percent on the news, following Wall Street’s lead.

European equities also advanced, with London closing with a gain of 0.8 percent, and both Paris and Frankfurt adding 0.4 percent.

New York’s Dow index was also up by 0.4 percent in midday trading. 

Some analysts struck a cautious tone, however, noting that much work needs to be completed before a framework trade agreement between China and the US could be reached.

“The rally in stocks has been based on hope rather than any concrete agreements overnight,” warned Oanda senior analyst Jeffrey Halley, predicting short-term volatility to come as headlines emerge from Beijing.

Fiona Cincotta at City Index agreed that “if we don’t start seeing something more tangible by March investors are going to get nervous again.”

– ‘Playing chicken’ –

On foreign exchange markets, renewed global investor confidence saw a movement away from the dollar — which has enjoyed a strong rally in the past week — to riskier currencies.

The pound briefly rose above $1.29 before falling back as Prime Minister Theresa May was accused by the opposition of “running down the clock” and “playing chicken” with Brussels over Brexit talks.

The yuan also earned back losses after it had dropped following the Lunar New Year break.

Trump’s suggestion that another chaotic US government shutdown was now unlikely following a deal struck in Congress over border security further fuelled risk appetite.

The deal to offer nearly $1.4 billion for construction of a Mexico border wall, as well as other security measures, fell far short of Trump’s demands but has been presented as a workable compromise.

“I don’t think you’re going to see a shutdown,” said the president.

– Key figures around 1650 GMT – 

London – FTSE 100: UP 0.8 percent at 7,190.84 points (close)

Frankfurt – DAX 30: UP 0.4 percent at 11,167.22 (close)

Paris – CAC 40: UP 0.4 percent at 5,074.27 (close)

EURO STOXX 50: UP 0.4 percent at 3,202.37

Tokyo – Nikkei 225: UP 1.3 percent at 21,144.48 (close)

Hong Kong – Hang Seng: UP 1.2 percent at 28,497.59 (close)

Shanghai – Composite: UP 1.8 percent at 2,721.07 (close)

New York – Dow: UP 0.4 percent at 25,519.47 

Euro/dollar: DOWN at $1.1289 from $1.1315 at 2130 GMT Tuesday

Pound/dollar: DOWN at $1.2865 from $1.2896

Dollar/yen: UP at 110.86 yen from 110.48 yen

Oil – Brent Crude: UP $1.02 cents at $63.44 per barrel

Oil – West Texas Intermediate: UP 85 cents at $53.95

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