STOCKS CLIMB AHEAD OF TRUMP-XI MEETING

LONDON – World stock markets and the US dollar started the second quarter on a positive note yesterday, although caution also set in as the first meeting between US President Donald Trump and China’s Xi Jinping loomed.

European shares opened broadly higher, tracking Asian shares up after generally upbeat economic data.

German manufacturing growth reached an almost six-year high in March, Markit’s Purchasing Managers’ Index for manufacturing showed yesterday. Manufacturing activity in France and Italy also rose, adding to signs of a pickup in momentum in the global economy.

A private survey on China’s manufacturing on Saturday came in below market expectations but still showed a healthy expansion after a similar survey by the government on Friday pointed to strong growth in the sector.

The Bank of Japan’s “tankan” survey showed that business sentiment improved, albeit slightly less than expected.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2%, while Japan’s Nikkei gained 0.8% after hitting a seven-week low on Friday.

US stock futures also indicated a positive open for Wall Street shares, while focus turned to a meeting on Thursday and Friday between the US and Chinese presidents.

“Despite the solid gains seen so far this year, there is some evidence that the rally in US markets is looking a little tired given President Trump’s trials and tribulations in Congress,” said Michael Hewson, chief market analyst at CMC Markets.

“The reflation trade is likely to face a new test this week when President Trump entertains the Chinese leader Xi Jinping at his Mar-a-Lago golf course in Florida, which in the words of President Trump himself could be a little ‘difficult’.”

A failure to push through healthcare reforms last month has added to concerns that Trump may struggle to pass highly-anticipated tax cuts and infrastructure spending bills.

Trump held out the possibility on Sunday of using trade as a lever to secure Chinese cooperation against North Korea and suggested Washington might deal with Pyongyang’s nuclear and missile programs on its own, if need be.

On Friday, the US president sought to push his crusade for fair trade and more manufacturing jobs back to the top of his agenda by ordering a study into the causes of US trade deficits and a clampdown on import duty evasion.

Any hints that Washington may name some of its trade partners such as China, Japan and Germany as currency manipulators could dent the dollar. The US Treasury will release its next currency report on April 15.

– Reuters