Stocks, US bond yields rise as trade row fails to dent confidence

Asian stocks rose and US Treasury yields hovered near four-month highs on Wednesday, as investors looked past the latest escalation in the US-China trade conflict, seen by some market participants as less severe than expected.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.15 per cent. Australian stocks added 0.35 per cent, South Korea's KOSPI climbed 0.1 per cent and Japan's Nikkei rose 1.45 per cent.

Equity markets in Asia took their cues from Wall Street, which posted a broad-based rally on Tuesday amid emerging views that the US-China trade dispute's impact on world growth might not be as heavy as previously feared.

“The broader equity markets are able to regroup now that the latest phase of the US-China trade war is over,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo. “There was relief as the United States set the initial tariffs at 10 per cent, rather than the expected 25 per cent, seen by some as a gesture that it was buying time for further negotiations.”

On Monday, the US administration said it will begin to levy new tariffs of 10 per cent on $200 billion of Chinese products on September 24, with the tariffs to go up to 25 per cent by the end of 2018. China said it will levy tariffs on about $60 billion worth of US goods, as previously planned, but cut the tariff rates.

Safe-haven US Treasuries were sold and their yields rose on the back of improved investor risk appetite. The benchmark 10-year Treasury yield stood at 3.055 per cent after touching 3.059 per cent overnight, its highest since May 23. The rise in yields propped up the dollar in turn. The greenback climbed to a two-month high of 112.395 yen overnight and last traded at 112.300.

China's yuan was a shade firmer at 6.858 per dollar in offshore trade after edging up 0.15 per cent on Tuesday. The Australian dollar, seen as a gauge of risk sentiment, edged up to a two-week peak of $0.7235 after advancing nearly 0.6 per cent on Tuesday. The euro was flat at $1.1671.

The pound shook off modest overnight losses and rose to $1.3175, its highest since July 26. Growing confidence that London and Brussels can secure an agreement has encouraged investors to buy into the British currency.

Crude oil prices consolidated after rallying the previous day on signs that OPEC would not be prepared to raise output to address shrinking supplies from Iran, and as Saudi Arabia signalled an informal target near current levels. US crude futures was 0.25 per cent lower at $69.69 a barrel after surging 1.4 per cent on Tuesday.

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