Reports of Fresh U.S.-China Trade Talks Infuses Optimism in Asian Stocks - Are Investors Reacting Too Soon?

On Friday, Asian markets jumped on hopes of a possible trade deal between the U.S. and China.

U.S. President Donald Trump on Thursday indicated that talks with China leader Xi Jinping were "moving along nicely." A Bloomberg report further suggested that Trump has asked his team to delineate terms of a proposed trade deal with China ahead of the President’s meeting with  Xi at the G20 leaders summit in Buenos Aires later this month. A spokesperson for China's Ministry of Foreign Affairs said on Friday, "I hope teams from both sides can implement the agreements achieved by the two countries' leaders".

Talks of talks between the two nations seemed to uplift Asia's major stock indexes  on Friday. Hong Kong's Hang Seng Index jumped more than +4%, China's Shanghai Composite and Japan's Nikkei both climbed about +2.5%. However, the question remains – will the two nations' talks materialize into reduced trade tensions between them? Not enough details of the U.S. proposed deal have been disclosed yet. The fact that previous talks/attempts at U.S.-China ceasefire had fallen through this year cannot be brushed aside either.

So far, the U.S. has slapped tariffs on over $250 billion of Chinese goods this year, while China has imposed levies on more than $110 billion of US goods. The bump in global stocks on Friday could extend to a further rally  if the upcoming talks between the two nations is actually able to ameliorate their trade relations.  Otherwise, the upswing could potentially get dampened.