Stock market news: Markets rally on Trump trade war climbdown

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• News of potential trade breakthrough between the United
  States and China has sent stocks across Asia and Europe sharply
  higher, while US futures are rallying.
  
• China’s benchmark Shanghai Composite Index had jumped
  2.7%, Hong Kong’s Hang Seng is up even more.
• The rally has extended into Europe, with major indexes
  gaining more than 1% in the first hour of trade. It looks set
  to continue when US markets open as well, with Dow futures
  pointing to a 0.9% rise at the open.
• The news follows a series of positive remarks offered
  by Donald Trump and Xi Jinping in relation to trade
  negotiations on Thursday.
• You can
  follow what’s going on in global stock markets at Markets
  Insider.

Stocks around the world are rallying sharply on Friday after
reports of a potential trade breakthrough between the United
States and China was a catalyst to counter
the brutal sell-off which characterised markets in October.

According to Bloomberg,
US President Donald Trump has asked key officials to begin
drafting potential terms of a trade agreement with China,
saying Trump is interested in reaching an agreement on trade
with Chinese President Xi Jinping at the G20 summit in Argentina
at the end of the month.

On top of an apparent easing in trade tensions on Thursday, the
news has been welcomed by investors across the region, especially
in China — which has so far this year seen its major indexes lose
30% or more of their value. October was especially brutal in
stock markets — after a string of sharp sell-offs, last month was
the worst month on for the S&P 500 in seven years.

“The trade war has been partly to blame for the recent
equities rout, so any signs that the two powers are making
progress will encourage investors to put risk back on the table
and pick up stocks at bargain levels,” Jasper Lawler, head of
research at London Capital Group said in an email.

Friday’s rebound saw the benchmark Shanghai Composite Index soar
2.7%, while the Hang Seng in Hong Kong has jumped by an even
larger 4.2%.

Those gains have continued into the European morning, with stocks
across the continent rallying, and looking set for a major gain
over the week, as indexes bounce back from the October horror
show. By 8.45 a.m. GMT (4.45 a.m. ET), major indexes in
continental Europe are broadly higher by more than 1%, with the
Euro Stoxx 50 index jumping 1.1%.

The only country missing out on Friday’s bounce is the UK, with
the FTSE 100 lagging behind on the back of a major rally in the
pound on Thursday. When the pound rises, the FTSE tends to fall
as the majority of companies on the index denominate their
earnings in dollars, so a stronger pound is a negative for them.

With Europe bouncing, it also appears that markets in the US are
ready to rebound. Futures point to all three major US indexes
opening higher later on Friday, with the Dow Jones pointing to a
0.85% gain at the open.

US stocks could get a further boost
when the latest data on non-farm payrolls is released at 8:30
a.m. in Washington (12.30 p.m. in London).

Job growth likely rebounded in October, with wages expected to
gain the most in 9-1/2 years, pointing to further labor market
tightening that could encourage the Federal Reserve to raise
interest rates again in December. Economists predict that the
unemployment rate is expected to stay at a 49-year low of 3.7%,
while payrolls probably increased by 190,000 jobs

Analysts urged caution, however.

“This remains a fragile situation, but it appears to have
turned a corner, providing a floor to the recent equity selloff,”
Lawler said. “Whilst talks are on a positive note we don’t expect
to see a repeat of those extreme bouts of selling that we saw
across October.”

News of Trump asking officials to draft new trade terms came
shortly after the president tweeted that he had a “long and very
good conversation with President Xi Jinping of China.”

“We talked about many subjects, with a heavy emphasis on Trade.
Those discussions are moving along nicely with meetings being
scheduled at the G-20 in Argentina,” he said.

According to Chinese state media, Xi Jinping also said on
Thursday that he hopes “China and the United States will be able
to promote a steady and healthy relationship.”

“The two countries’ trade teams should strengthen contact and
conduct consultations on issues of concern to both sides, and
promote a plan that both can accept to reach a consensus on the
China-US trade issue,” Xi said, according to CCTV state
television.

Business Insider Australia’s David Scutt contributed
reporting.