LONDON: Stock markets and the dollar rose Tuesday after US President Donald Trump said he would thump China with another round of tariffs but give some room for talks before jacking them up to the highest rate.
"The deferred nature of the extra tariffs appears to have convinced some in the markets to indulge in some light buying," noted Michael Hewson, chief market analyst at CMC Markets UK.
The latest volley from the White House will see $200 billion worth of goods taxed at 10 percent from September 24, going up to 25 percent from January 1 if the sides are unable to hammer out a deal.
Trump warned also that another $267 billion had been lined up if Beijing retaliates.
With $50 billion of goods already being hit, that would mean Washington will have subjected virtually all goods China ships to the US to tariffs.
China on Tuesday warned it would "take countermeasures", adding that the "US insists on increasing tariffs, which brings new uncertainty to the consultations between the two sides".
After an early sell-off, Asian stock markets enjoyed a bounce Tuesday on hopes officials from the world's top two economies will be able to thrash out an agreement before the end of the year.
The gains fed through into Europe, with London shaking off Brexit concerns.
The widespread optimism has been boosted by the fact Trump left off some key items from the latest target list, while he is also due to meet Chinese President Xi Jinping in November and will likely want a deal in place.
"While the US tariffs salvo is hardly middling, it's not as bad as it could have been, so unless China hits with draconian measures, markets should remain supported after this morning's knee-jerk reactions," said Stephen Innes, head of Asia-Pacific trading at OANDA.
"Ultimately the graduated tariff hike allows more room to negotiate before the thumping 25 percent levy gets triggered, so perhaps China may temper their response accordingly."
By the end of the day Shanghai had rallied 1.8 percent and Tokyo was up 1.4 percent while Hong Kong gained 0.6 percent.
"There were investors who'd been thinking a 25 percent tariff in one go is a possibility," Shogo Maekawa, a global market strategist with JPMorgan Asset Management, said.
"It could be considered something good in this realm of bad things."
- Key figures around 0945 GMT -
London - FTSE 100: UP 0.1 percent at 7,308.98 points
Frankfurt - DAX 30: UP 0.4 percent at 12,146.04
Paris - CAC 40: UP 0.4 percent at 5,370.19
EURO STOXX 50: UP 0.3 percent at 3,356.63
Tokyo - Nikkei 225: UP 1.4 percent at 23,420.54 (close)
Hong Kong - Hang Seng: UP 0.6 percent at 27,084.66 (close)
Shanghai - Composite: UP 1.8 percent at 2,699.95 (close)
New York - Dow Jones: DOWN 0.4 percent at 26,062.12 (close)
Euro/dollar: DOWN at $1.1684 from $1.1685 at 2040 GMT
Pound/dollar: DOWN at $1.3129 from $1.3159
Dollar/yen: UP at 111.94 yen from 111.83 yen
Oil - Brent Crude: UP $1.11 at $79.16 per barrel
Oil - West Texas Intermediate: UP 86 cents at $69.77 per barrel