Asian shares hit 3-and-a-half-week high on US-China trade optimism(Update)


  • Markets
  • Wednesday, 9 Jan 2019

MSCI's broadest index of Asia-Pacific shares outside Japan climbed 1.5 percent to its highest level since Dec. 14.  Japan's Nikkei rose 1.3 percent, while China's benchmark Shanghai Composite and the blue-chip CSI 300  rebounded 1.5 percent and 1.8 percent, respectively.  U.S. stock futures also firmed.

MSCI's broadest index of Asia-Pacific shares outside Japan climbed 1.5 percent to its highest level since Dec. 14. Japan's Nikkei rose 1.3 percent, while China's benchmark Shanghai Composite and the blue-chip CSI 300 rebounded 1.5 percent and 1.8 percent, respectively. U.S. stock futures also firmed.

TOKYO: Asian shares climbed to a 3-1/2-week high on Wednesday, supported by growing optimism that the United States and China can strike a trade deal to avoid an all-out confrontation that would severely disrupt the global economy.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> climbed 1.5 percent to its highest level since Dec. 14.

Japan's Nikkei <.N225> rose 1.3 percent, while China's benchmark Shanghai Composite <.SSEC> and the blue-chip CSI 300 <.CSI300> rebounded 1.5 percent and 1.8 percent, respectively.

U.S. stock futures <ESc1> also firmed.

Wall Street's S&P 500 <.SPX> gained nearly 1 percent on Tuesday, extending its rebound from 20-month lows touched around Christmas to more than 9 percent. [.N]

The United States and China agreed to extend trade talks in Beijing for an unscheduled third day on Wednesday, amid signs of progress on issues including purchases of U.S. farm and energy commodities and increased access to China's markets.

But sources said the two sides were still far apart from U.S. demands for structural reforms in China.

President Donald Trump wrote on Twitter overnight that "Talks with China are going very well!"

Bloomberg reported Trump is increasingly eager to strike a deal with China soon in an effort to perk up financial markets that have slumped on concerns over the trade war, citing people familiar with internal White House deliberations.

The rally in riskier assets has accelerated since last Friday, when Federal Reserve Chairman Jerome Powell said he was aware of risks to the economy and would be patient and flexible in policy decisions this year.

"Markets are scaling back some of their extreme nervousness after Powell effectively did some easing, with his words. But short-covering could run its course soon," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

"Hopes on U.S.-China trade talks are helping. Some sort of deals are likely to increase Chinese imports of natural gas, soybeans and so on from the U.S. Yet, it should be hard to resolve more structural issues such as intellectual property rights," he added.

Oil prices also extended a rally on hopes of progress in the trade talks.

U.S. West Texas Intermediate (WTI) crude oil futures <CLc1> rose above $50 per barrel overnight for the first time in 2019. They rose 1.5 percent in Asia to $50.51. [O/R]

U.S. bond yields also climbed, with the benchmark 10-year Treasuries yield <US10YT=RR> rising to 2.733 percent, compared with its one-year low of 2.543 percent hit just before Friday's strong payrolls data.

In another sign of subsiding worries about the U.S. economic outlook, Fed funds rate futures <0#FF:> show traders are now pricing in only a small chance of a rate hike this year, a change from late last week when a rate cut was almost fully priced in.

In currency markets, the dollar was little changed against major currencies.

The euro traded at $1.1452 <EUR=> while the dollar stood at 108.89 yen <JPY=>.

There was little market reaction to Trump's prime-time televised address where he made his case that a U.S.-Mexico border wall is urgently needed, despite opposition from Democrats.

That suggests the dispute on the issue, which has sparked a government shutdown since late December and already caused some delays in the release of key U.S. economic data, is nowhere near a resolution. - Reuters

Earlier report:

Asian shares edge up on US-China trade optimism

TOKYO: Asian shares inched up on Wednesday, supported by optimism the United States and China can strike a trade deal to avoid an all-out confrontation that will severely disrupt the global economy.

Japan's Nikkei rose 0.9 percent while MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.3 percent.

Wall Street's S&P 500 gained 0.97 percent on Tuesday, extending its gains from 20-month lows touched around Christmas to more than 9 percent.

The United States and China will continue trade talks in Beijing for an unscheduled third day on Wednesday, amid signs of progress on issues including purchases of U.S. farm and energy commodities and increased access to China's markets.

Bloomberg also reported on Wednesday that U.S. President Donald Trump is increasingly eager to strike a deal with China soon in an effort to perk up financial markets that have slumped on concerns over the trade war, citing people familiar with internal White House deliberations.

The rally in risk assets has accelerated since last Friday, when Federal Reserve Chairman Jerome Powell said he was aware of risks to the economy and would be patient and flexible in policy decisions this year.

"Markets are scaling back some of their extreme nervousness after Powell effectively did some easing, with his words. But short-covering could run its course soon," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

"Hopes on U.S.-China trade talks are helping. Some sort of deals are likely to increase Chinese imports of natural gas, soybeans and so on from the U.S. Yet, it should be hard to resolve more structural issues such as intellectual property rights," he added.

Oil prices also extended their rallies on hopes of progress in the trade talks.

U.S. West Texas Intermediate (WTI) crude oil futures <CLc1> rose above $50 per barrel for the first time in 2019 to stand at $50.17, up 0.7 percent.

U.S. bond yields also rose further, with the benchmark 10-year Treasuries yield <US10YT=RR> rising to 2.730 percent, compared with its one-year low of 2.543 percent hit just before Friday's strong payrolls data.

In another sign of subsiding worries about the U.S. economic outlook, Fed funds rate futures <0#FF:> have priced in a small chance of a rate hike this year, a sea change from late last week when a rate cut was almost fully priced in.

In the currency market, the dollar was little changed against major currencies.

The euro traded at $1.1455 <EUR=> while the dollar stood at 108.81 yen <JPY=>.

Traders are looking to Trump's prime-time televised address at 9 p.m. (0200 GMT Wednesday), where he is expected to make his case that a border wall is urgently needed despite opposition from Democrats.

That suggests the dispute on the issue, which has sparked a government shutdown since late December, is nowhere near a resolution.

Trump has considered declaring the border situation a national emergency, which could enable him to bypass Congress' mandate to approve federal spending and to build the wall without its approval.

Such a step, however, would likely face an immediate legal challenge and could lead to further polarisation in the U.S. political environment. - Reuters

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