China stocks soar on Beijing's vow to prop up economy as Trump's tariffs kick in, hitting billions' worth of goods

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., August 12, 2019. REUTERS/Eduardo Munoz

Reuters

  • Beijing signaled measures to keep the economy afloat as a fresh round of tariffs on US and Chinese goods kicked in this week.
  • China and European equities jumped. US futures fell as American markets are closed for the Labor Day holiday.
  • The Trump administration slapped tariffs of 15% on $112 billion worth of Chinese goods on Sunday, and China retaliated with the first of two batches of duties targeting $75 billion worth of US goods.
  • "The outlook does not look positive for a deal any time soon," one analyst said.
  • View Markets Insider's homepage for more stories.

China stocks jumped on Monday after Beijing signaled measures to keep the economy afloat as a fresh round of tariffs on US and Chinese goods kicked in this week.

Risks to the economy are manageable and the state wants to keep "reasonably ample" liquidity as it faces the brunt of the trade war, the State Council's financial stability and development committee said, according to Bloomberg. The committee was at a conference chaired by Vice Premier Liu He, Bloomberg said.

European equities jumped while US futures fell. Markets are closed in the US for the Labor Day holiday. Hong Kong and Japan stocks slid.

The Trump administration slapped tariffs of 15% on $112 billion worth of Chinese goods including footwear, apparel, and Apple Watches on Sunday, and plans to roll out duties on a further $160 billion in Chinese products such as laptops and cell phones in mid-December.

The Chinese government retaliated by rolling out the first of two batches of tariffs targeting $75 billion worth of US goods. It hiked the price of importing American pork, beef, chicken, and agricultural goods, and plans to ramp up tariffs on soybeans from 25% to 30% in mid-December.

Trade representatives from the world's two biggest countries will hold talks this month, Donald Trump told reporters on Sunday, according to Bloomberg. Yet the US president struck a defiant tone, signaling the yearlong dispute won't be easily settled. "We can't allow China to rip us off anymore," he said.

Analysts aren't optimistic the two sides can reach a resolution.

"Trade and tariffs continue to gnaw away at investor confidence," Neil Wilson, chief market analyst for Markets.com, said in a morning note. "The outlook does not look positive for a deal any time soon."

Meanwhile, a positive set of Chinese economic data could persuade authorities to hold out for an attractive deal. Chinese manufacturing activity increased in August, according to the latest reading from the Caixin Purchasing Managers' Index, which rose from 49.9 in July to a five-month high of 50.4.

More government stimulus might be necessary to sustain the revival.

"China's economy showed signs of a short-term recovery, but downward pressure remains a long-term problem," Dr. Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, said in a statement. "Amid unstable Sino-American relations, China needs to step up countercyclical policies."

Here's the market roundup as of 10:30 a.m. in London (5.30 a.m. in New York):

  • European equities were broadly higher with Britain's FTSE 100 up 1%, and Germany's DAX and the Euro Stoxx 50 up 0.1%.
  • Asian indexes were mixed with China's Shanghai Composite up 1.3% and Japan's Nikkei down 0.4%. Hong Kong's Hang Seng slumped 0.4% after protesters clashed with police at the territory's main airport and forced road closures.
  • US stock markets are closed for Labor Day. Futures fell with those underlying the Dow Jones Industrial Average down 0.5%, while S&P 500 and Nasdaq futures slid by 0.3% to 0.4%.
  • Oil prices fell with West Texas Intermediate crude down 0.5% at $54.80 a barrel, and Brent crude down 0.7% at about $58.80.
  • Gold inched up 0.2% to $1,532. The haven asset is hovering at its highest level since 2013.

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