Asian markets bounce after Trump-fuelled plunge
AFP – Asian markets mostly rose Tuesday, paring some of the previous day’s painful losses as investors welcomed news that Chinese trade negotiators will travel to Washington this week despite Donald Trump’s threat to hike tariffs.
Equities across the region were hammered Monday — led by Shanghai’s worst losses in three years — after the president’s warning fuelled by frustration at slow progress in the talks.
However, after hefty losses at the open, European and US markets slowly recovered to end slightly lower as dealers focused on Beijing’s decision not to cancel their next meeting, as some reports had suggested earlier in the day.
Trump’s remarks came as a shock, coming just days after officials on both sides had sounded positive on the talks, with markets broadly expecting an agreement to be announced soon.
While some observers pointed out that such high-stakes moves are characteristic of Trump’s negotiating style and that they expect a deal to be agreed anyway, OANDA senior market analyst Jeffrey Halley remained cautious.
"Say what you want about the US president… but predictability and subtlety were never part of his election pledges," he said in a note. "China has most certainly found this out the hard way and likely explains why they are still sending their full delegation to this week’s round of trade talks.
"I take much greater comfort in China’s pragmatism than the president’s Twitter account, but the markets should take a leaf from China’s playbook and not assume the president was merely bluffing."
Still the sense of relief in the US filtered through to Asia, where Shanghai rose 0.9 percent after diving more than five percent on Monday.
Hong Kong also added 0.8 percent following a nearly three-percent plunge, while Sydney was up a similar amount.
– ‘Reality setting in’ –
Singapore rose 0.3 percent, while Taipei and Jakarta gained 0.7 percent. Manila and Wellington were also well up.
Tokyo fell 0.8 percent by the break as dealers returned after being off for six working days, while Seoul dropped one percent following a long weekend.
However, the optimism was tempered by reports of a warning from US Trade Representative Robert Lighthizer that there had been an "erosion in commitments by China" and that tariffs were still due to be hiked Friday.
There is a broad expectation some deal will eventually be reached but how extensive it will be is unknown.
"Reality is setting in that they are not going to get the master deal, the grand deal that they are hoping for and there’s a lot of work to be done," said Oliver Pursche, chief market strategist at Bruderman Asset Management.
"We really think that there will be a deal; it will be a very mediocre deal but one that both sides can live with. Our best guess is that these tariffs will be implemented on Friday, but will then be reversed relatively quickly," he told Bloomberg TV.
On currency markets, the yuan stabilised after being hammered Monday, though most other higher-yielding, riskier units managed to claw back some of their losses.
The Australian dollar was in focus with the country’s central bank to decide on whether or not to cut interest rates later in the day as it battles soft inflation and economic growth.
But while officials are tipped to ease borrowing costs this year, forecasts are for it to stand still for now as it assesses the global economic outlook, and particularly its crucial export market China.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: DOWN 0.8 percent at 22,087.37 (break)
Hong Kong – Hang Seng: UP 0.8 percent at 29,435.69
Shanghai – Composite: UP 0.8 percent at 2,931.13
Euro/dollar: UP at $1.1200 from $1.1199 at 2050 GMT
Pound/dollar: UP at $1.3109 from $1.3097
Dollar/yen: DOWN at 110.68 yen from 110.87 yen
Oil – West Texas Intermediate: DOWN two cents at $62.23 per barrel
Oil – Brent Crude: DOWN 12 cents at $71.12 per barrel
New York – Dow: DOWN 0.3 percent at 26,438.48 (close)
London – FTSE 100 – Closed for public holiday