A woman walks past an electronic board showing the Nikkei stock index outside a brokerage in Tokyo, Japan. Picture: REUTERS/KIM KYUNG-HOON
A woman walks past an electronic board showing the Nikkei stock index outside a brokerage in Tokyo, Japan. Picture: REUTERS/KIM KYUNG-HOON

Sydney — Asian shares staged a cautious rally on Monday as investors dared to hope for some progress in the protracted Sino-US trade dispute, while the outperformance of recent US economic data gave the dollar a leg up on its peers.

MSCI’s broadest index of Asia-Pacific shares outside Japan bounced 0.7%, after losing 0.4% last week.

Japan’s Nikkei firmed 0.7%, while Australian stocks rose 0.5% and Shanghai blue chips 0.3%.

E-Mini futures for the S&P 500 added 0.2%, while Eurostoxx 50 futures gained 0.6%. FTSE futures firmed 0.3%.

On Saturday, US national security adviser Robert O’Brien said an initial trade agreement with China is still possible by the end of the year, though he warned Washington would not turn a blind eye to what happens in Hong Kong.

The comments add to worries that a Chinese crackdown on antigovernment protests in Hong Kong could further complicate the talks.

At the weekend, pro-democracy candidates in Hong Kong romped to a landslide and symbolic majority in district council elections in the embattled city.

“The fact that talks are still happening remains a positive,” said Robert Rennie, head of financial market strategy at Westpac. “Markets are showing some signs of tiring of the steady drip feed of upbeat comments from US officials and no signs of a final agreement looking likely.”

He noted six weeks have passed since the “phase one” deal was agreed in principle yet there is still no deal in place.

“Key for markets will thus be whether the December 15 tariffs covering approximately $156bn of largely technology imports are postponed and whether a deal can be signed ahead of that date, with press suggesting that these tariffs will be delayed to give negotiators more time.”

Reuters reported an ambitious “phase two” trade deal was also looking less likely, according to US and Beijing officials, legislators and trade experts.

Least dirty

In currency markets, the dollar rallied on Friday when US manufacturing surveys beat forecasts, just as EU numbers disappointed.

“US economic data outperformed, highlighting again the resilience of the economy and that while global growth has slowed, it remains the least dirty T-shirt in the laundry basket,” said Tapas Strickland, a director of economics and markets at National Australia Bank.

“For the EU data, the important takeaway was the ongoing decline in the manufacturing sector is now spreading to the larger services sector, a worrying sign for the global economy.”

European Central Bank president Christine Lagarde called on eurozone governments on Friday to strengthen domestic demand after a global trade war brought a decade of export-driven growth to an abrupt end.

Federal Reserve chair Jerome Powell speaks later on Monday and is expected to underline the steady outlook for rates given the better economic figures.

The euro was off at $1.1020 on Monday, having breached chart support at $1.1040, while the dollar edged up to ¥108.76.

The dollar was steady on a basket of currencies at 98.271, after gaining 0.3% last week.

Spot gold was flat at $1,461.20 per ounce, restrained by the bounce in the dollar.

Oil prices held near two-month highs helped by expectations of an extension to Opec+ production cuts.

Brent crude futures firmed 17c to $63.58, while US crude rose 13c to $57.90 a barrel.