Asian shares rise as China and US weigh fresh talks
Asian shares nudged higher on Friday as moves by the United States and China to resolve a bitter trade dispute and a sharp interest rate hike in crisis-hit Turkey supported global risk appetite.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.4 percent in early trade, following gains on Wall Street overnight.
Australian shares were up 0.5 percent, while Japan’s Nikkei stock index gained 0.9 percent.
On Wall Street, the Dow Jones Industrial Average rose 0.57 percent on Thursday, the S&P 500 gained 0.53 percent and the Nasdaq Composite added 0.75 percent.
Shares around the world have been buoyed by news of a possible new round of talks between Washington and Beijing, even as the trade war between the world’s two largest economies looks set to escalate.
Chinese officials welcomed an invitation from Treasury Secretary Steven Mnuchin for new talks. But US President Donald Trump tempered market expectations, tweeting on Thursday that the US is “under no pressure to make a deal with China.”
The Trump administration is readying a final list of $ 200 billion in Chinese imports on which it plans to levy tariffs in the coming days, a move that many fear would mark a severe escalation in the trade war and put a significant dent in global growth.
“The news on Wednesday that US officials had invited China to restart trade talks suggests that the announcement of tariffs on $ 200bn of Chinese imports may be delayed. But we think the chance that fresh talks will defuse trade tensions is low,” Capital Economics analysts said in a note.
The analysts noted that Mnuchin had brokered a deal with China in May that was scuppered days later by Trump.
“As a result, he has little credibility with Chinese policymakers,” they said.
The uncertainty around the trade tensions was highlighted by the European Central Bank, which on Thursday kept policy unchanged as expected and warned that risks from protectionism were gaining prominence.
Turkey’s central bank helped to support sentiment in emerging markets, striking out in a rare show of independence to hike its benchmark interest rate by 625 basis points, to 24 percent.
Currency crises both in Turkey and Argentina have stoked fears of contagion over the past several weeks, hammering emerging market assets from Indonesia to India to South Africa.
After rising as high as 6.01 to the dollar, the lira weakened slightly to 6.1340 in early Asian trade.
“While the move is encouraging, the CBT faces a challenging macroeconomic environment characterized by rising inflation amid a sharp deceleration in economic activity,” Citi analysts said in a note. “We continue to believe that the external adjustment that lies ahead is likely to be more challenging than the previous episodes.”
The yield on benchmark 10-year Treasury notes continued to flirt with the 3 percent level, rising to 2.9700 percent compared with its US close of 2.964 percent on Thursday.
The two-year yield, sensitive to expectations of higher Fed fund rates, touched 2.7524 percent compared with a US close of 2.756 percent.
The two-year yield fell Thursday after data showed US consumer prices rose less than expected in August, and underlying inflation pressures also appeared to be slowing, suggesting the Federal Reserve’s pace of rate hikes could slow.
Markets will also be focused on a raft of data from China due later this morning as investors look to any signs of economic stress from the heated trade dispute with the United States.
The euro was flat at $ 1.1688 after rising on Thursday on comments from ECB President Mario Draghi that focussed on healthy domestic fundamentals, including rapid growth in employment and a rise in wages.
The pound traded at USD 1.3114. On Thursday, the Bank of England kept interest rates on hold and highlighted greater financial market concerns about Brexit, a month after raising borrowing costs for only the second time in more than a decade.
The dollar rose 0.08 percent against the yen to 112.01.
US crude was 0.4 percent higher at USD 68.88 a barrel as Hurricane Florence approached the US east coast. Brent crude also up 0.4 percent, to USD 78.48 per barrel.
Gold moved higher, with spot gold gaining 0.16 percent USD 1202.31 per ounce.