Stocks soar along with hopes for US-China trade war truce

Asian and European stock markets charged higher on Friday after Donald Trump hailed positive talks with Chinese President Xi Jinping and a report said he had asked officials to draw up a draft bill as he eyes a potential trade deal between the two.

Hong Kong jumped more than 4%, while Shanghai and the yuan soared as dealers seized on the news, hoping for a breakthrough in a standoff that has rocked global equities and fuelled warnings about global growth.

Meanwhile in Europe, the main markets also rose strongly.

"There's been another leg higher for global stock markets in recent trade after comments from both the US and China have raised hopes of a de-escalation in trade tensions between the world's two largest economies," said David Cheetham, chief market analyst at XTB online trading.

Trading in Asia started with a bang after Trump tweeted that he had held positive talks with Xi, which was a rare sign of hope in the months-long stand-off between the world's top two economies.

"Just had a long and very good conversation with President Xi Jinping of China. We talked about many subjects, with a heavy emphasis on Trade," he wrote.

He added that trade talks were "moving along nicely" and meetings were "being scheduled" at the G20 summit in Buenos Aires at the end of the month.

The comment comes days after Trump warned he would impose tariffs on all China's shipments to the US before saying he thought he could "make a great deal with China" but it was not yet ready.

Later, Bloomberg News, citing unnamed sources, reported that the president has requested key cabinet secretaries put together an outline deal to call a ceasefire in the painful row. It said several agencies had been called in to help with putting the plan together.

Hong Kong enjoyed its best percentage gain since December 2011, even though the market had already been buoyant after Beijing said it would introduce measures to kickstart the stuttering economy.

The yuan also rallied to 6.8966 to the dollar - its best rate since mid-October - well off the 10-year lows around 6.97 on Thursday.

'Still cautious'

Analysts welcomed the change of the tone, but warned a deal had not yet been done.

"Positive comments from President Trump over US-China trade tension are cheering the market in the short term," said Tai Hui, chief market strategist for Asia Pacific at JP Morgan Asset Management.

"Dollar moderation, the stabilising trade relationship between US and China and more stimulus from Beijing will be the key ingredients to revive market confidence in Asia," he said.

"While we are still cautious over a full resolution of recent tensions in the medium term, resumption of dialogue between Washington and Beijing would be good enough to investors for now."

Cheetham at XTB, was similarly cautious.

"While this rhetoric is pleasing it should be acknowledged that nothing has actually changed on the trade war front," he said.

"And while the noises coming from both Washington and Beijing are no doubt more upbeat, there remains some way to go before a deal is reached."

Oil prices steadied after Thursday's plunge of more than 2% on oversupply worries, with US sanctions on Iran due within days but other major producers ready to pick up the slack.

The commodity has lost around 15% from four-year highs at the start of last month as Russia and OPEC said they would bolster output and dealers grew concerned about the impact on demand from a trade war between China and the US.

Reports said Friday that the US has allowed eight countries, including India, Japan and South Korea, to continue buying from Iran after the sanctions have come into effect to stop prices surging, as long as they agree to reduce purchases.

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