Optimism around US-China talks fuel Asian shares
Equities rise as a report of progress in trade talks stirs hope of a deal in the tariff dispute between the US and China
Tokyo — Asian stocks advanced on Friday as a report of progress in US-China trade talks stirred hopes of a deal in their tariff dispute and supported risk sentiment.
The Wall Street Journal reported on Thursday that US treasury secretary Steven Mnuchin discussed lifting some or all tariffs imposed on Chinese imports and suggested offering a tariff rollback during trade discussions scheduled for January 30.
US stocks rallied following the report, but pared some of those gains after a treasury spokesperson told CNBC that Mnuchin had not made any such recommendations. WSJ also reported that US trade representative Robert Lighthizer has resisted Mnuchin’s idea. For the day, all three major US indices were up, led by a surge in industrial stocks.
Even the whiff of progress in the months-long China-US trade war helped boost risk sentiment. MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.7%. The index has gained 1.4% this week.
The Shanghai Composite Index was up 0.8%.
Australian stocks rose 0.5%, as did South Korea’s Kopsi while Japan’s Nikkei gained more than 1% to a one-month high.
“As with 2018, the US-China trade row remains a key market theme in 2019. A slight difference is that there are some signs that the two sides are seeking some sort of a resolution,” said Soichiro Monji, senior economist at Daiwa SB Investments in Tokyo.
“China seems to be running low on options, while the US would also want to avoid a prolonged conflict given the negative consequences on its markets and the economy,” Monji said.
Chinese Vice-Premier Liu He will visit the US on January 30 and 31 for the latest round of trade talks aimed at resolving the dispute between the world’s two largest economies.
In December, Washington and Beijing agreed to a 90-day truce in a trade war that has disrupted the flow of hundreds of billions of dollars of goods.
Indicators released recently have shown signs that the Chinese economy is losing some momentum.
China’s fourth-quarter economic growth, due to be reported on Monday, likely slowed to the weakest pace since the global financial crisis, a Reuters poll showed, as demand faltered at home and abroad.
The dollar was mildly supported after US treasury yields rose amid the improvement in risk appetite in the broader markets.
The greenback was a shade higher at ¥109.320 after popping up to a two-week high of ¥109.40 overnight. The dollar has gained about 0.7% against the Japanese currency this week.
The euro was little changed at $1.1393 after dipping slightly overnight. The common currency was on track for a weekly loss of 0.7%.
The 10-year treasury yield stood at 2.750% after going brushing 2.761% the previous day, its highest in three weeks.
The pound traded at $1.2978, hovering close to a two-month peak of $1.3001 scaled overnight on the back of hopes that Britain can avoid a no-deal Brexit.
British Prime Minister Theresa May’s Brexit deal suffered a heavy defeat in parliament this week but she survived a subsequent vote of confidence, removing some political uncertainty for now.
US crude oil futures extended gains after rising the previous day on a bounce in Wall Street and news that Opec sharply curtailed production in December.
US crude futures added 1% to $52.61 a barrel. The contracts have gained more than 2% this week.
Brent crude was up 0.8% at $61.67 a barrel and on track to gain 2% on the week.
Elsewhere in commodities, palladium was 0.6% higher at $1,403.50/oz after rising to a record high of $1,434.50 overnight.
Demand has recently outstripped supply for the metal, used in emissions-reducing catalytic converters for cars. Palladium also appeared to get a boost from hopes for further government stimulus in China, the world’s biggest car market.
Spot gold was steady at $1,291.56/oz, having relinquished its spot as the most expensive precious metal to palladium early in December.