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S&P 500, FTSE 100 Futures Up as U.S.-China to Hold Trade Talks

Heejin Kim, Abhishek Vishnoi and Moxy Ying
S&P 500, FTSE 100 Futures Up as U.S.-China to Hold Trade Talks

(Bloomberg) -- U.S. and U.K. stock index futures rose after China announced that its trade negotiators will travel to Washington early next month for the next round of talks.

E-mini contracts on the S&P 500 Index for September delivery gained as much as 1.1% by 6:53 a.m. in London, while FTSE 100 futures rose 0.6%. Contracts on the Dow Jones Industrial Average added 1% and those on the Nasdaq 100 Index climbed 1.2%. Vice Premier Liu He agreed to the visit in a phone call on Thursday morning Beijing time with Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer.

Hong Kong stocks were little changed after yesterday’s 4% surge, when the city’s leader Carrie Lam formally withdrew controversial legislation that would have allowed extraditions to the mainland.

Developments in Hong Kong and “trade talks in Washington in early October is enough to give the market some confidence, although brief it may end up being,” said James Soutter, a fund manager at Newgate Capital Partners Pty. “The events that also unfolded yesterday in Hong Kong have shown that China’s will can be bent.”

Allowing Lam to pull the proposed extradition bill is a “very interesting signal from China” and “one that plays to a more conciliatory tune,” Soutter said.

Here’s what other market professionals are saying:

Alan Richardson (Samsung Asset)

“I expect there will be no major breakthrough, so a market rise ahead of the talks is an opportunity to reduce risk.”

Eleanor Creagh, Kay Van-Petersen (Saxo Capital)

“The current dynamics create an environment where the likely path for bilateral relations between the U.S. and China is one of escalating tensions, despite any intermittent hiatus. This means risk sentiment will remain fragile and volatility will likely persist, so traders will have to remain tactical and nimble.”“Even without the trade war we still have a slowing economic cycle to contend with, recessionary dynamics in the manufacturing sector and a strong USD which is arguably more destructive.”“I think the key thing is, we have had a change in sentiment... from very bearish to more constructive. So this way at least, the market could infer that the risk for a September meeting being canceled is no longer there.”“We, of course, still have to wait for any potential response from Trump.”

Hannah Anderson (JPMorgan Asset)

It is unlikely that the negotiations will make much progress on either side’s key demands, given that the hardening stances by China and the U.S. in the past few monthsThe uncertainty of trade talks remains a key overhang to market and may continue to “constrains investment, slow growth, elevates volatility and darkens the outlook for investors for all stripes.”Market to be bumpy for last four months of 2019 as businesses will continue to face margin pressures, central banks lack the tools to entirely offset the negative effects from trade war

Jeffrey Halley (Oanda)

“The results are predictable so far. Although it is a meeting and not a resolution of the dispute, in the short term that won’t matter to Asian markets.”“High-beta currencies to China such as AUD, NZD and regional Asian currencies should all outperform today.”

Jingyi Pan (IG Asia)

“The latest news on U.S., China talks to be held in October joins the series of positive developments to boost risk sentiment. While it is uncertain whether this would mean a delay of further tariffs for the next round of talks, it does fuel hopes and spells a relief from the tense situation as of present.”

Olivier d’Assier (Axioma)

“There is a schedule for talks but no schedule for a deal, and until that happens, uncertainty continues.”Investor’s risk appetite is currently low so it will take real progress to turn them aroundUncertainty, volatility, correlation, and valuations remain high in the market; 4Q historically has been a quarter with a volatility spikeExpects investors to raise cash positions in portfolios until uncertainty over key geopolitical binary outcomes clears-up

To contact the reporters on this story: Heejin Kim in Seoul at hkim579@bloomberg.net;Abhishek Vishnoi in Singapore at avishnoi4@bloomberg.net;Moxy Ying in Hong Kong at yying13@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Naoto Hosoda, Tom Redmond

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