CHINA’S shares and the yuan currency jumped yesterday after Chinese and U.S. leaders agreed to a temporary truce in their bitter trade spat.

The yuan rose as much as 1.09 percent to 6.883 per dollar. The CSI 300 Index gained 2.78 percent at the close, led by rallies in ZTE Corp., Hangzhou Hikvision Digital Technology Co. and exporters that have most to gain from improving trade relations. The benchmark 10-year government bond yield gained 2 basis points to 3.40 percent.

The agreement means the United States will hold off on its prior plans to raise tariffs on US$200 billion worth of Chinese goods, which were set to take effect from January. The news boosted risk assets globally yesterday, encouraging strategists at Morgan Stanley to upgrade their already-positive forecast for China’s stocks next year. The rally also helped lift equity benchmarks in Hong Kong and Shanghai above key support levels.

“The outcome of the U.S.-China presidential meeting in G20 was better than the market expected,” Morgan Stanley strategists including Jonathan Garner wrote in a note. “The agreement to keep talking for 90 days during which tariffs are paused is an upside surprise.”

Skeptics say it will take more than a pause on tariffs to turn around the negative sentiment that’s blanketed the markets this year. Weaker economic growth remains a key overhang for investors, who are still reckoning with soaring corporate defaults and a bear market in stocks.

“The trade situation is slightly better than before but there’s no substantial development,” said Hong Hao, a strategist with Bocom International Holdings Co. “What we have now is a truce at the best. This may produce a short-term rebound, though the resilience of the rally depends on how soon everyone will begin to see the situation through.”

U.S. President Donald Trump said in a tweet yesterday that China has agreed to “reduce and remove” tariffs on imported American-made cars, spurring a rally by Chinese auto dealerships. Foreign ministry spokesman Geng Shuang declined to comment on any changes to car tariffs at a press conference yesterday afternoon.

In Shanghai, China Grand Automotive Services Co. surged 7.1 percent and Pang Da Automobile Trade Co. added 5.4 percent. China Yongda Automobiles Services Holdings Ltd. added 5.6 percent in Hong Kong.

(SD-Agencies)