Asian shares make small gains as traders adopt cautious stance ahead of trade talks
Nikkei climbs 1.0% while MSCI’s broadest index of Asia-Pacific shares outside Japan rise 0.73%
Tokyo — Asian shares inched up on Tuesday, with Chinese shares making modest gains after a weeklong holiday, though investors remained cautious over US-China trade talks after President Donald Trump said a quick trade deal was unlikely.
Japan’s Nikkei climbed 1.0% while MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.73%, led by gains in tech shares in South Korea and Taiwan.
South Korea’s Samsung Electronics rose 1.2% after its profit guidance. The semiconductor firm said its third-quarter operating profit was likely to fall 56% on a downturn in global memory chip prices, but that was better than what analysts had expected.
Taiwan's stock index gained 0.7% to hit five-month highs while Hong Kong shares extended gains after the territory’s leader said she had no plans to use the emergency regulation ordinance to introduce other laws.
Shanghai shares rose 0.3% after the weeklong break, though gains were led mainly by defensive shares ahead of the crucial trade talks.
Spending on retail goods and dining during China’s National Day holidays returned to growth in 2019, offering unexpected respite to an economy that has been expanding at its weakest pace in almost three decades.
Still, a private survey showed China's services sector grew at its slowest pace in seven months in September.
On Wall Street, the S&P 500 lost 0.45% on Monday, unable to sustain gains made after positive tweets and news headlines about the trade talks.
“Given the importance of the event, markets will be extremely nervous. I expect things to stay this way for now. On the whole, markets are not that optimistic about the outlook,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.
US and Chinese deputy trade negotiators on Monday launched two days of talks aimed at paving the way later this week for the first minister-level negotiations in months.
But prospects for progress in US-China trade talks dimmed after Washington blacklisted Chinese companies over Beijing’s treatment of predominantly Muslim ethnic minorities.
Among those blacklisted, trading in video surveillance company Hikvision was suspended, while voice recognition front-runner IFLYTEK fell as much as 3.1%.
Trump also said he hoped China found a humane and peaceful resolution to the political protests in Hong Kong, and warned the situation had the potential to hurt trade talks.
The bilateral talks are getting under way ahead of a scheduled increase in US tariffs on $250bn worth of Chinese goods, to 30% from 25% on October 15.
Trump has said the tariff increase will take effect if no progress is made in the negotiations.
“This ongoing trade-war discussion is a much more secular theme rather than something that is going to be resolved in the next couple of days,” said Maurice Meijers, a fixed-income portfolio manager at Dutch fund manager Robeco in Singapore.
Meijers said he does not expect a sudden huge breakthrough that would give markets reason to rally. “That's very unlikely, I'll expect this to be an ongoing theme.”
In the currency market, the Turkish lira steadied for now after declining more than 2% on Monday over concerns about Ankara's planned incursion in northern Syria.
Trump threatened to destroy Turkey's economy if Ankara takes a planned military strike in Syria too far even though the US leader himself has opened the door for a Turkish incursion.
The lira traded at 5.837 per dollar, near its weakest level since September 2.
Major currencies were more rangebound.
The euro stood at $1.0973, with its recovery from its 2½-year low of $1.10879 hit a week ago meeting a strong resistance around $1.10.
The dollar traded at ¥107.40, up 0.15% after having found some support around ¥106.50 in the past few sessions.
Sterling traded at $1.2290, capped by concerns that sizeable differences between Britain and the EU remained for striking a Brexit withdrawal deal.
The yuan gained 0.35% to 7.1269 yuan per dollar after the Chinese central bank set a stronger-than-expected midpoint.
US debt yields jumped back as $78bn in note and bond supply slated for auction this week helped push prices lower after last week’s dramatic rise.
The 10-year US Treasuries yield last stood at 1.575%.
Oil prices rose on Tuesday, as unrest in oil-producing countries Iraq and Ecuador raised concerns of supply disruption.
Brent crude futures rose 0.51% to $58.65 a barrel while US West Texas Intermediate (WTI) crude gained 0.61% to $53.07 a barrel.
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