Sawt Falasteen - Stocks rally on hopes of China stimulus and tariff relief

Global stocks had tumbled Tuesday after China, Mexico and Canada hit back at US tariffs and fears grew that Europe could be Trump's next target.

There was speculation some tariffs could be walked back after US Commerce Secretary Howard Lutnick told Fox Business he thought Trump would "work something out" with regards to Canada and Mexico.

"Somewhere in the middle will likely be the outcome, the president moving with the Canadians and Mexicans, but not all the way," he said.

Investors also welcomed China's economic targets for the coming year, with Hong Kong climbing more than two percent to lead Asian gains.

China set an annual growth target of around five percent and vowed to make domestic demand its main economic driver, as lawmakers attended the annual meeting of the National People's Congress.

Beijing also announced a rare hike in fiscal funding, allowing its budget deficit to reach four percent this year.

It comes alongside a pledge to create 12 million new jobs in China's cities and a push for two percent inflation this year.

The world's second-largest economy is also planning to increase defence spending by 7.2 percent, the same as last year.

But observers have tempered expectations for an expected stimulus given that China is facing strong economic headwinds.

These include a persistent property sector debt crisis, stubbornly low consumer demand and stuttering employment for young people.

"We remain sceptical that it will be sufficient to prevent growth from slowing this year, especially given the headwinds on the external front and the lack of a more pronounced shift in government spending towards support consumption," said Julian Evans-Pritchard, head of China economics at Capital Economics.

US tariffs, which are expected to hit hundreds of billions of dollars in total trade between the United States and China, also weighed on investors' minds.

Trump signed an executive order on Monday to increase a previously imposed 10 percent tariff on Chinese goods to 20 percent.

He also pushed ahead with 25 percent tariffs on US imports from major trading partners Canada and Mexico early this week.

China responded by saying it would impose levies of 10 and 15 percent on a range of US agricultural imports.

Similarly, Canada announced 25 percent levies on $155 billion worth of US goods.

"There'll be a little disturbance, but we're OK with that. It won't be much," Trump said on Tuesday during his first address to a joint session of Congress since returning to the White House.

Markets responded positively to China's ambitious economic targets and the prospect of tariff relief, with Hong Kong gaining 2.8 percent.

Hong Kong firm CK Hutchison rose more than 20 percent after the company agreed to sell its lucrative Panama Canal ports to a US-led consortium under fierce pressure from Trump.

Bangkok and Jakarta were also two percent higher while Seoul, Taipei and Manila were up around one percent and Tokyo, Shanghai, Kuala Lumpur and Singapore were all in the green. Sydney and Wellington slipped.

The rally extended to Europe, with London, Paris and Frankfurt all opening up.

- Key figures around 0815 GMT -

Tokyo - Nikkei 225: UP 0.2 percent at 37,418.24 (close)

Hong Kong - Hang Seng Index: UP 2.8 percent at 23,594.21 (close)

Shanghai - Composite: UP 0.5 percent at 3,341.96 (close)

London - FTSE 100: UP 0.5 percent at 8,806.92

Euro/dollar: UP at 1.0668 from 1.0485 on Tuesday

Pound/dollar: UP at $1.2825 from $1.2694

Dollar/yen: UP 149.41 from 149.32 yen

Euro/pound: UP at 83.19 pence from 82.60 pence

West Texas Intermediate: DOWN 0.50 percent at $67.92 per barrel

Brent North Sea Crude: DOWN 0.07 percent at $70.99 per barrel

New York - Dow: DOWN 1.6 percent at 42,520.99 (close)

D.Qudsi--SF-PST