Stocks

Confirmation of US-China trade talks lifts Asian shares, investor spirits

Reuters TOKYO | Updated on September 05, 2019 Published on September 05, 2019

MSCI's broadest index of Asia-Pacific shares outside Japan was up 1.08 per cent at its highest since August 2, while the Shanghai composite index surged 1.7 per cent. Japan's Nikkei added 2.4 per cent. File Photo   -  Bloomberg

Brexit vote boosts global shares

Asian shares extended gains on Thursday and US stock futures jumped after China said it will hold trade talks with the US in early October, raising hopes they can de-escalate their trade war before it inflicts further damage on the global economy.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 1.08 per cent at its highest since August 2, while the Shanghai composite index surged 1.7 per cent. Japan's Nikkei added 2.4 per cent.

US stock futures reversed early losses and rose 1 per cent.

Pan-European Euro Stoxx 50 futures were up 1.01 per cent, with Germany's DAX futures up 1.04 per cent and FTSE futures up 0.64 per cent.

The Chinese yuan jumped versus the dollar in offshore trade, while safe-haven assets such as gold, the Swiss franc, and the yen fell.

China's confirmation of trade talks added to upbeat geopolitical news overnight. A parliamentary vote in Britain put the brakes on the nation's no-deal exit from the European Union, Hong Kong withdrew a contentious extradition bill that sparked recent protests and political turmoil in Italy appeared to be easing.

China's Commerce Ministry said its trade team will consult with their US counterparts in mid-September in preparation for negotiations in early October, hinting at progress in reducing trade friction.

Both sides had agreed to take actual actions to create favourable conditions, the ministry added, without giving more details.

“Since yesterday, there has been limited downside in markets because of what happened in Hong Kong, but now the US-China talks are the story,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management Co in Tokyo.

“It's the same about Brexit, which means less downside risk.”

Any sign that Washington and Beijing are closer to scaling back or resolving their trade dispute would lift a significant burden from the global economy, but many analysts believe the two sides are dug in for a longier and costlier battle.

Hong Kong shares erased early losses to rise 0.3 per cent. They had jumped in afternoon trade on Wednesday after leader Carrie Lam said she was withdrawing an extradition bill that had triggered months of often violent protests in the Asian financial hub.

Lam said on Thursday she hopes the formal withdrawal of a controversial extradition bill and other measures will help solve the city's political crisis.

In currency markets, sterling held onto gains against the dollar in Asia after rallying the most in more than five months on Wednesday after lawmakers voted to prevent Prime Minister Boris Johnson taking Britain out of the European Union without a deal on October 31.

But, more than three years since the UK voted narrowly to leave the EU, the outcome of Brexit is still unclear, with possible outcomes ranging from a crash out of the EU to abandoning the whole endeavour.

Against the offshore yuan, the dollar fell 0.2 per cent to 7.1340 yuan. Spot gold fell 0.5 per cent to $1545.58 per ounce.

The dollar rose 0.17 per cent to 106.60 yen gained 0.3 per cent to 0.9839 Swiss franc.

US Treasury yields extended gains in Asia and the yield curve steepened, both signs that investors were willing to take on riskier assets. The 10-year yield rose to 1.5145 per cent, while two-year yields rose to 1.4899 per cent.

The spread between two- and 10-year Treasury yields , the most commonly used measure of the yield curve, approached the highest since Aug. 21.

The curve inverted on August 14 for the first time since 2007 when long-term yields traded below short-term yields, which is a widely accepted indicator of coming recession.

US West Texas Intermediate crude was little changed at $56.27 per barrel.

Crude futures surged 4.3 per cent on Wednesday, the biggest daily gain since July 10, due to positive economic data from China and easing geopolitical concerns.

Published on September 05, 2019
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