HONG KONG, May 13 (Reuters) - China stocks are set to open strongly on Tuesday, reacting to a U.S.-China deal to delay and slash tariffs and de-escalate trade tensions between the world's two biggest economies.
The deal inked between U.S. and Chinese officials after weekend talks in Geneva surpassed market expectations and led to a strong rally in global stocks and the U.S. dollar. The news came just after mainland markets .SSEC closed on Monday and caused the Hong Kong market .HSI to surge ahead of its close.
The Hang Seng China Enterprises Index .HSCE rose more than 3% on the news, while Hong Kong's benchmark Hang Seng Index .HSI also closed up 3% at a near six-week high. U.S. stocks .DJI jumped nearly 3% overnight.
The yuan CNH=D3 was little changed against the dollar on Tuesday after rallying 0.6% on Monday.
The deal "is a nice big surprise to markets and economies for both sides of the Pacific Ocean," wrote Ting Lu, chief China economist at Nomura.
"However, it might be just the beginning of the inevitable collision of the two largest economies. After enjoying a rebound, markets perhaps need to ponder the medium to long term risk."
U.S. Treasury Secretary Scott Bessent, speaking after talks with Chinese officials in Geneva, said on Monday the two sides had agreed on a 90-day pause on their tit-for-tat measures.
The U.S. will cut extra tariffs it imposed on Chinese imports in April this year to 30% from 145% and Chinese duties on U.S. imports will fall to 10% from 125%, the two sides said on Monday.
Ahead of the news, China's blue-chip CSI300 Index .CSI300 climbed 1.2% while the Shanghai Composite Index .SSEC added 0.8%.
China stocks have recovered fully from the sharp sell-off last month triggered by U.S. President Donald Trump's punitive tariff measures on "Liberation Day". The blue-chip CSI300 Index .CSI300 is 0.2% higher than its April 2 level.
The truce will be a boon to Chinese consumer electronics makers .CSI931494 and other major exporters to the U.S.
But gold miners .CSI930619 will likely suffer as prices of the yellow metal, a safe-haven asset, dropped on the news. China's agriculture sector .CSI000949, vulnerable to potentially more imports from the U.S., could also come under pressure.
It was not clear how the agreement will affect China's rare earth companies. The strategically important sector .CSI930598 was not mentioned in the talks, but the U.S. said China will commit to "suspending or removing the non-tariff countermeasures".
(Reporting by Hong Kong and Shanghai Newsroom; Editing by Jamie Freed)
((jiaxing.li@tr.com; +852 63358304))
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