A pedestrian walks past an electronic stock board displaying the Nikkei 225 Stock Average and the Shanghai Stock Exchange Composite index in Tokyo, Japan. Picture: BLOOMBERG/TOMOHIRO OHSUMI
A pedestrian walks past an electronic stock board displaying the Nikkei 225 Stock Average and the Shanghai Stock Exchange Composite index in Tokyo, Japan. Picture: BLOOMBERG/TOMOHIRO OHSUMI

Sydney — Asian shares neared nine-month highs on Monday after US treasury secretary Steven Mnuchin said he hopes US-China trade talks are approaching a final lap, while strong Chinese export and bank loan data boosted confidence in the global economy.

The consequent improvement in risk appetite resulted in the dollar easing against other major currencies.

MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.6% to its highest since late July. Chinese shares led the growth with the blue-chip CSI300 index rising 2.2%.

Hong Kong’s Hang Seng added 1.2% while South Korea’s Kospi rose 0.7%. Japan’s Nikkei also joined the party, gaining 1.4% to the highest since early December.

“Stocks bulls certainly have the wind at their backs with improving growth but steady inflation, reduced trade tensions and a solid/better-than-feared Q1 earnings season,” JPMorgan analysts said in a note.

The rally follows on from strong finish on Wall Street on Friday as investors cheered Chinese data showing exports rebounded in March to a five-month high while new bank loans jumped by far more than expected.

Investors also welcomed positive headlines on the Sino-US trade talk.

“We expect a relatively market-friendly US-China deal,” Bank of America Merrill Lynch global economist Ethan Harris said in a note. “In our view, market and political concerns will constrain future fights. Think ‘skirmishes’ rather than ‘major battles’.

On Saturday, Mnuchin said a US-China trade agreement would go “way beyond” previous efforts to open China’s markets to US companies and hoped that the two sides were “close to the final round” of negotiations.

Further whetting risk appetite, US negotiators have tempered demands that China curb industrial subsidies as a condition for a trade deal after strong resistance from Beijing.

Investors have been fretting about a global growth slowdown in 2019 as trade disputes and tighter financial conditions hit demand. Worryingly, the IMF cut its outlook for the world economy for the third time in six months.

There have also been fears that weakness in key economies, including China, could spread to other countries, especially if elevated trade tensions between Beijing and Washington escalated further.

As a result, the Group of 20 industrialised nations have called for a trade truce, signalling world leaders are prepared to take action to curtail risks of a global economic slowdown.

Risk reward

Investors are next looking to China’s March-quarter GDP data due on Wednesday. A Reuters poll predicted it would show growth slowing 6.3% from a year earlier, the weakest pace since the global financial crisis a decade ago.

All eyes are also on corporate earnings from major US companies after quarterly results from JPMorgan handily beat analyst estimates last week.

On Friday, the Dow jumped 1%, the S&P500 climbed 0.7% and the Nasdaq added 0.5%. JPMorgan analysts were less confident this share euphoria could continue, with valuations already sky high.

In currencies, the dollar index was 0.1% weaker at 96.863 against a basket of major currencies as demand for safe haven assets eased. It had slipped to a near three-week trough of 96.745 on Friday.

The Australian dollar, which is often used as a proxy for China plays, hovered near a seven-week top at $0.7173.

The euro was a tad firmer at $1.1309 as dealers were gearing up for demand from Japan as Mitsubishi UFJ Financial closed in on its multibillion-euro acquisition of DZ Bank’s aviation-finance business.

The common currency was also supported by encouraging data from the euro zone where industrial output in February declined by less than expected.

In commodities, oil provided big milestones last week, with Brent breaking through the $70 threshold and the US benchmark posting six straight weeks of gains for the first time since early 2016.

Brent crude oil futures was last off 14c at $71.41 while crude futures, the US benchmark, eased 29c to $63.60.

Reuters