Optimism over a possible trade deal between the two largest economies in the world is helping to support markets on both sides of the Pacific Ocean, as Chinese equities rally alongside their US counterparts.

The Shanghai Composite

SHCOMP, + 1.84%

won for a third session on Wednesday and the Chinese yuan

USDCNY, -0.1993%

it's firmed against the US dollar after President Donald Trump toned down his speech against China. The news also strengthened US stocks

SPX, + 0.48%

with major indices trading to highs in 2019.

Trump said on Tuesday that he might not insist on a March 2 deadline in bilateral negotiations if the two countries were close to a compromise. According to the Associated Press, the United States is expected to raise tariffs on Chinese imports worth $ 200 billion by that date.

The positive reaction to the possibility of détente between the two economic superpowers underscores the impact of trade on world markets, while the fear that a prolonged stalemate will weigh more heavily on economic growth beyond China and other countries. United States

China, the world's largest exporter, has already experienced sharp trade tensions with gross domestic product up 6.6% in 2018, its lowest rate since 1990.

If the pace of China's economic expansion is not mocking, for a country that has such a heavy influence on international trade and the economy, any problem could spread around the world.

At the same time, the trade war, the slowdown in China, the tightening of corporate credit conditions and US policy are "extreme risks" that investors should watch for, said Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch.

The strategist had recently said that the weak Asian export cycle was dragging the world into a revenue recession and only China could fix it.

Chinese exports fell by 4.4% year-on-year and imports by 7.6% in December, while Korean exports, a popular barometer of world trade, fell by 5.8% and imports by 1.7% in January.

Lily: For the US stock market, a victory of the trade war can be a hollow victory

Admittedly, investors in China will welcome a resolution on the trade front, where shares plunged to the lowest in recent months in recent months. The Shanghai Composite reached its lowest level since November 2014 in November 2014 after a 25% drop last year, while the Shenzhen Composite

399106, + 1.87%

also fell to a four-year low in October. Both gained ground with the Shanghai index up 9.1% and Shenzhen up 9.6% in 2019.

MSCI China

MCHI, + 0.64%

a benchmark for exchange-traded funds associated with the country, also recovered from a decline of 20% in 2018 to reach 12%.

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