Emerging markets stocks rise to six month high on back of influx in Chinese economy

Emerging-market shares surged on Monday, led by the biggest one-day gains for Chinese stocks in more than three years, after U.S. President Donald Trump extended a deadline for China and the United States to reach a trade agreement. Trump's decision came less than a week before U.S. tariffs on $200 billion worth of Chinese imports were due to rise to 25 per cent from 10 per cent.

The delay "means that the scenario people were worried about - that tariffs would go up ... and China would respond - has been taken off the table, at least for now," said Gareth Leather, a senior economist with Capital Economics. "I suspect given Trump's personal involvement, we will probably see a deal being reached," he said. But he warned that "if Trump is serious about the reservations he's had about China, I don't think they are going to be resolved with a deal, given how intractable they are."

Mainland China blue-chip shares climbed by 6 per cent and the Shanghai Composite jumped 5.6 per cent. Both reached their highest in more than eight months and posted their best day since about July 2015. Trump confirmed the extension on Sunday but did not set a new deadline. He said there could be "very big news over the next week or two" if all went well in the negotiations, and he agreed to meet with Chinese leader President Xi Jinping.

The uncertainty spurred by the U.S.-China trade war has roiled emerging markets for months, prompting investors to jettison risky assets. Stocks rose across the developing world. The MSCI index of emerging-market shares jumped 0.7 per cent to its highest in almost six months. Turkey's BIST index was up 1.5 per cent and Russian and South African shares climbed more than 0.5 per cent each.

The Chinese yuan also gained after U.S. Treasury Secretary Steven Mnuchin said U.S. and Chinese officials had reached a deal on currency issues. It was last up 0.3 per cent at 6.6908. South Africa's rand rose 1 per cent and Russia's rouble was set for a seventh straight day of gains.

Among European currencies, the Czech crown gained after Vojtech Benda, a central bank board member, said policymakers might consider raising interest rates if a no-deal Brexit weakened the crown. For GRAPHIC on emerging market FX performance 2019, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance 2019, see https://tmsnrt.rs/2OusN