Investors look at computer screens showing stock information in Shanghai, China. Picture: REUTERS/ALY SONG
Investors look at computer screens showing stock information in Shanghai, China. Picture: REUTERS/ALY SONG

Tokyo — Asian shares won a reprieve on Thursday, as news that the Trump administration has reached out to China for a new round of trade talks raised hopes a deal could be struck in the bitter tariff dispute between the world’s two biggest economies.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6%, a day after it hit 14-month lows.

China’s A-shares shot up 1.2% on hopes for reduced trade tension, but the excitement did not last long, and the index’s gain was almost erased, leaving it up only 0.1%.

Japan’s Nikkei gained 0.9%. On Wall Street, the S&P 500 was up 0.04% on Wednesday.

Senior US officials, led by treasury secretary Steven Mnuchin, recently sent an invitation to their Chinese counterparts, including Vice-Premier Liu He, to hold another bilateral trade meeting.

That development comes as more than 85 US industry groups launched a coalition on Wednesday to take public their fight against President Donald Trump’s trade tariffs.

The tariffs have escalated far beyond what business groups once imagined, as the Trump administration prepares to activate duties on $200bn worth of Chinese goods, hitting a broad array of internet technology products and consumer goods from handbags to bicycles to furniture.

"Public support for Trump has fallen in recent weeks, with Democrats seen likely to capture the House of Representatives. He probably needs some sort of achievements on trade ahead of the mid-term elections," said Mutsumi Kagawa, chief global strategist at Rakuten Securities in Tokyo.

"So there could be a shift in his trade policy. He will surely keep his hard line rhetoric but his administration may seek to make some deals behind the scene."

However, many market players remained cautious.

"While we agree this should provide short-term relief, the road ahead can still be tricky," said Tai Hui, chief market strategist for JPMorgan Asset Management in Hong Kong, noting concessions China made earlier this year did not satisfy Trump.

"China may not be able to offer much more than that, especially if this involves adjusting its Made in China 2025 policy," he said in a note.

Still, any serious signs of easing in trade tension should benefit shares in China and other Asian courtiers the most, given they have borne the brunt of US protectionist moves. The trade tension has hammered global riskier assets over the past few months as policymakers and investors worried about the hit to the world economy.

MSCI’s broad emerging markets index has fallen more than 20% from its peak in January, entering bear market territory.

In the currency market, the dollar eased a little on the trade talk hopes as well as on soft US wholesale price data, which undermined the case for a faster pace of policy tightening by the Federal Reserve.

US producer prices unexpectedly fell in August, recording their first drop in a year-and-a-half and denting the talk of accelerating inflation that followed Friday’s strong wage data.

The euro traded at $1.1636, extending its gain this week to 0.71%. The yen weakened slightly on Thursday to ¥111.40 to the dollar on easing trade worries.

Sterling held near a six-week high of $1.3087 as Brexit-supporting lawmakers in British Prime Minister Theresa May’s party publicly pledged support for her to stay in power.

The European Central Bank and the Bank of England hold policy meetings on Thursday, but both are widely expected to leave interest rates unchanged.

Perhaps attracting more attention is a policy meeting by the Turkish central bank, which is expected to raise interest rates to shore up its battered lira.

The lira has lost more than 40% of its value against the dollar this year, hit by worries over President Tayyip Erdogan’s grip on monetary policy and by a diplomatic spat between Ankara and Washington.

The lira crisis has spread to some other emerging-market countries with weak economic fundamentals such as sizable current account deficits.

The lira traded at 6.3450 to the dollar, up about 1.1% on the week and well off its record low of 7.240 reached one month ago.

Oil prices fell, reversing some of the strong gains from the previous session, as economic concerns raised doubts about growth in fuel demand.

Brent futures hit $80 a barrel on Wednesday but eased in Asia to $79.25, down 0.6% on the day.

Reuters

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