Trade talk optimism keeps Asian shares close to four-month highs
Equities enjoy support from the hope that China-US trade talks are making progress and the expectation of policy stimulus from central banks
Tokyo/Sydney — Asian shares hovered near four-month highs on Tuesday, supported by the hope that China-US trade talks were making progress and the expectation of policy stimulus from central banks.
Investor confidence was bolstered by mild gains in European stocks as US markets were shut on Monday for a public holiday.
MSCI’s broadest index of Asia-Pacific shares outside Japan was a shade firmer, while Japan's Nikkei was almost flat.
Chinese shares were little changed, too, with the blue-chip index up 0.1% after surging in the previous session.
Reports of progress in trade talks between the US and China have prompted investors to be mildly optimistic that the two countries can reach a compromise by March 1 that will de-escalate their dispute or at least avoid a sharp hike in tariffs, although few details from the talks have emerged.
A new round of talks between the US and China to resolve their trade war will take place in Washington on Tuesday, with follow-up sessions at a higher level later in the week, the White House said on Monday.
President Donald Trump said last week he might extend the March 1 deadline, which would stop an immediate increase in tariffs on $200bn worth of Chinese imports to 25% from 10%.
Reflecting changing sentiment, Chinese shares have risen rapidly so far this month, with MSCI’s China A shares index up 6.5%, by far the best performance among major markets despite China’s weakening economy.
Additionally, investors are now seen returning to riskier asset markets after the US Federal Reserve signalled earlier this year it could halt rate hikes in light of US economic softness.
“In the last week, it seems like global central banks have started a possible process of monetary easing,” Bank of America-Merrill Lynch strategist Ajay Singh Kapur said in a note.
“If so, this would be very positive for Asia/emerging-market stocks,” Kapur said.
“Central bank balance sheets are the most important driver of stock prices, in our view, by lowering risk premia, and cutting off deflation risk.”
In currency markets, the euro and other risk-sensitive currencies remained underpinned by hopes on US-China trade talks, although most currencies were stuck in familiar ranges.
The euro changed hands at $1.1304, off Friday’s three-month low of $1.1234.
A run of soft European economic data, including Germany’s GDP figures, has weighed on the common currency.
Comments from European Central Bank’s (ECB) Olli Rehn on Sunday have fanned speculation the ECB would launch another round of targeted long-term refinancing operations (TLTRO) to support bank lending.
The dollar stood at ¥110.49, stepping back from Thursday’s seven-week peak of ¥111.13.
Sterling was slightly weaker at $1.2905, with an eye on Brexit talks between Britain and the EU.
The precious metals market was slightly more lively, with palladium surging to a record high of $1,462.5/oz as stricter emissions standards are seen increasing demand for the autocatalyst metal.
Gold held around $1,325/oz after earlier rising to a near 10-month high of $1,327.40.
Oil prices were mixed, with Brent futures off 40c at $66.10, not far from Monday’s $66.83 which was the highest since mid-November.
US crude futures added 12c to $55.71.