Asian markets climb on Trump trade deal comments

Asian shares rose on Wednesday as upbeat signals from US-China 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 indexes 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 per cent. Australian shares added 0.65 per cent and Japan's Nikkei rose 0.36 per cent.

Chinese blue-chip shares, in contrast, dropped 0.39 per cent 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 United States 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 was 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.

Trump's comments came alongside softer-than-expected economic data from the United States, which showed a fourth straight 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 were 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 pointed 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.

Fed Chair Jerome Powell said on Monday monetary policy was ”well positioned” to support the strong US labour market.

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

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

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

In currency markets, the dollar strengthened 0.06 per cent 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 per cent at 98.313.

Oil prices retreated after rising Tuesday on reassuring trade headlines. US West Texas Intermediate crude was down 0.34 per cent at $58.21 per barrel. Global benchmark Brent crude lost 0.33 per cent to $64.06 per barrel.

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

COMMENT NOW