People walk past an electronic board showing Japan's Nikkei average and the yen’s exchange rate against the dollar outside a brokerage in Tokyo, Japan. Picture: REUTERS/TORU HANAI
People walk past an electronic board showing Japan's Nikkei average and the yen’s exchange rate against the dollar outside a brokerage in Tokyo, Japan. Picture: REUTERS/TORU HANAI

Shanghai — Asian shares rose on Wednesday as upbeat signals from China-US trade talks fanned hopes of an easing of tariff hostilities, while expectations the Federal Reserve will keep interest rates low supported sentiment.

The positive mood pushed Wall Street indices to fresh record closing highs on Tuesday and stoked confidence in Asia with MSCI’s broadest index of Asia-Pacific shares outside Japan up 0.19%. Australian shares added 0.65% and Japan’s Nikkei rose 0.36%.

Chinese blue-chip shares, in contrast, dropped 0.39% after the data showed profits at China’s industrial firms declined in annual terms for the third consecutive month in October, tracking sustained drops in producer prices and exports and underscoring slowing momentum in the world’s second-largest economy.

US President Donald Trump said on Tuesday the US and China are close to agreement on the first phase of a trade deal after top negotiators from the two countries spoke by telephone and agreed to keep working on remaining issues.

But while Trump said Washington is in the “final throes” of work on a trade deal with Beijing, he also underscored US support for protesters in Hong Kong, seen as a sore point for Beijing.

Consumer confidence

Trump’s comments came alongside softer-than-expected economic data from the US, which showed a fourth consecutive monthly contraction in consumer confidence and an unexpected drop in new home sales in October.

However, consumer confidence still remained at levels able to support steady consumer spending, and the housing data for September was revised up, with purchases touching more than 12-year highs.

Kay Van-Petersen, global macro strategist at Saxo Capital Markets in Singapore, said while US-China trade headlines may be driving some tactical, near-term moves in the market, they are mostly just “noise”.

The broader market direction is “about the accommodative Fed and accommodative monetary policy and the fact that structurally the meta-trend is still lower in yields and rates”, he said.

Some analysts said a fall in US bond yields on Tuesday also point to more mechanical explanations beyond trade for rising equity prices.

“It reinforces the notion that it really is the Fed pump-priming to grease the wheels of market liquidity which is driving both these moves,” Greg McKenna, strategist at McKenna Macro, said in a morning note.

Record highs

Fed chair Jerome Powell said on Monday monetary policy is “well positioned” to support the strong US labour market.

On Tuesday, the Dow Jones Industrial Average rose 0.2% to 28,121.68, the S&P 500 gained 0.22% to 3,140.52 and the Nasdaq composite added 0.18% to 8,647.93. All three indices notched record closing highs.

On Wednesday, the rally in US Treasuries moderated across the curve, with benchmark 10-year notes yielding 1.7483%, up from their US close of 1.74% on Tuesday.

The two-year yield, watched as a guide to market expectations of Fed policy, rose to 1.5959% compared with a US close of 1.586%.

In currency markets, the dollar strengthened 0.06% against the yen to 109.10 and the euro was slightly weaker, buying $1.1017.

The dollar index, which tracks the greenback against a basket of six major rivals, was up 0.06% at 98.313.

Oil prices retreated after rising Tuesday on reassuring trade headlines. US West Texas Intermediate crude was down 0.34% at $58.21 per barrel.

Global benchmark Brent crude lost 0.33% to $64.06 per barrel.

Gold was lower, changing hands at $1,459.43 per ounce on the spot market, down 0.12%. 

Reuters