Energy Sector Given Further Boost From Rising Oil Price
Equities have been on the rise globally since yesterday as investors react positively to the prospect of the current truce in the ongoing trade war between the U.S. and China being extended. Both sides agreed to pause the tit-for-tat tariff increases that have worried stock markets over the last several months and are seen as a significant factor in China’s recent economic slowdown. Talks looking for an agreement have been ongoing and some positive noises have come from both sides. These talks currently have a March 1st deadline to reach a conclusion. However, yesterday President Trump announced that could be extended if the two sides were confident they were getting close to a ‘real deal’.
China's CSI A-shares index has gained 3% over the past two sessions, including 2% on Wednesday. Hong Kong’s Hang Seng also gained 1.2% on Wednesday morning. In Europe, London’s FTSE 100 and Frankfurt’s Xetra Dax both added 0.4% on Tuesday and have started Wednesday’s trading session positively.
However, the recently bullish mood of stock markets will only be sustained if trade talks continue to show signs of progress and, finally, actually result in a deal being agreed on. That would remove months of uncertainty and would be expected to stimulate new investment by companies in both the USA and China that have decided to wait for more clarity.
Another positive catalyst for equities has been a boost for energy stocks so far this week. Brent crude has risen back towards $63 a barrel after gaining 2% over the past 2 sessions. The increasing price is the result of Saudi Arabia announcing new production cuts designed to stop recent price drops.