China Stocks gain on trade deal reports

Mainland China equity market finished session higher on Friday, 13 December 2019, on news that the world's two largest economies had reached a "deal in principle" to resolve a trade war that has rattled markets for nearly two years. At closing bell, the benchmark Shanghai Composite Index inclined 1.8%, or 51.98 points, to 2,967.68. The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 1.5%, or 24.22 points, to 1,660.55. The blue-chip CSI300 index was up by 2%, or 77.20 points, to 3,968.22.

Traders risk sentiments bolstered on hopes that the trade spat between the world's two largest economies may finally come to an end after President Donald Trump statement that the U.S. is getting close to a "big deal" with China. Traders were also encouraged by reports that US and Chinese negotiators have agreed in principle to the "phase one" trade deal. Washington has offered to slash existing tariffs and cancel new ones set to kick in on Sunday, December 15, in exchange for more agricultural purchases and intellectual property protection.

 

China's Ministry of commerce said on Thursday that its negotiators were in "close communication" with their American counterparts ahead of the new round of tariffs, but gave no indication whether the trade talks were making progress. But late Thursday, Myron Brilliant, head of international affairs for the U.S. Chamber of Commerce, confirmed that both sides were close to inking a modest trade deal that would suspend the new tariffs and reduce existing ones by an unspecified amount. In return, China would buy more U.S. farm products, increase American companies' access to the Chinese market and tighten protection for intellectual property rights, said Brilliant, who has been briefed by both sides.

CURRENCY NEWS: China's yuan was up against the dollar after the People's Bank of China (PBOC) set higher mid-point fixing and after reports that the United States and China agreed to reduce existing tariffs and delay new ones set to take effect this weekend. After opening at 6.9595 per dollar on Friday morning, the onshore spot yuan CNY=CFXS strengthened as much as 1.02% from its late-night close to 6.9570 per dollar, its firmest since Aug. 2.

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