HONG KONG, May 20, 2019 (BSS/AFP) – Most Asian markets rose Monday after
Donald Trump showed signs of conciliation in his trade wars but investors
remain on edge over the China-US standoff with some concerns that talks
between the two have stalled.
Sydney led gainers and the Australian dollar rallied after a shock win for
the business-friendly conservatives, while Japanese dealers were cheered by
forecast-beating economic growth data.
However, the pound is wallowing around four-month lows on growing fears
Britain will leave the European Union without a divorce deal.
Global markets have been in turmoil for two weeks since Trump threatened
— and later delivered — a hike in tariffs on Chinese imports, to which
Beijing retaliated and relit their debilitating trade battle.
The move also threw a spanner in the works for long-running negotiations
between the economic superpowers that were thought to have been close to
conclusion.
That was compounded by Trump’s decision to bar Chinese telecoms firms from
the US market and added Huawei to a blacklist restricting US sales to the
firm.
But there was a sliver of hope after Trump on Friday removed steel tariffs
on Canada and Mexico and announced a six-month delay in imposing steep
tariffs on auto imports as he seeks talks with Japan and the EU on the issue.
Most equity markets were in positive territory, with Sydney more than one
percent higher following the surprise victory of Prime Minister Scott
Morrison’s Liberal-National coalition in weekend elections. The Aussie dollar
also enjoyed support, climbing 0.7 percent against the greenback.
Tokyo ended the morning 0.3 percent higher, with traders taking heart from
news that the Japanese economy expanded more than expected in the first
quarter and improved slightly from the previous three months.
Seoul gained 0.6 percent, Wellington added 0.3 percent and Taipei was 0.4
percent higher.
However, Hong Kong shed 0.6 percent and Shanghai was off 0.8 percent, with
Jakarta and Manila also down.
– Sterling under pressure –
Still, Michael Metcalfe, global head of macro strategy at State Street,
said markets could be ready for a healthy bounce.
“Right now, cash levels are at quite elevated levels and investors have
money to put back into the market,” he told Bloomberg TV.
“That dry powder, that potential for cash to come back in, means that once
we get a resolution of the trade war and once we start to see better economic
data, as we’ve just seen in Japan for instance, then that money is going to
get dragged back out of cash into the market.”
The pound continued to struggle after the Labour opposition walked out of
talks with Prime Minister Theresa May that were aimed at reaching a deal to
leave the EU.
The news increases the chances Britain will crash out of the bloc on
October 31, which most observers warn would hammer the economy.
May will next week try to push through parliament an agreement reached
with her EU colleagues, but there is little hope for success after seeing it
rejected three times already.
There are fears the premier will step down after another failure, which
could open the way for a hardline Brexiter to take over and push for a no-
deal exit.
Still, OANDA senior market analyst Jeffrey Halley looked on the bright
side.
“With so much lost hope factored into the pound in the short-term — and
given Australia has just proved political miracles can happen — a Theresa
May rabbit from the hat could set the pound up for a mighty rebound,” he said
in a note.
On crude markets, both main contracts jumped more than one percent after
OPEC kingpin Saudi Arabia and key producer UAE said they would stick to
output caps agreed with Russia.
The news reinforced oil buying, with rising tensions between the US and
Iran adding to concerns about supplies from the Middle East.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 0.3 percent at 21,307.84 (break)
Hong Kong – Hang Seng: DOWN 0.6 percent at 27,773.32
Shanghai – Composite: DOWN 0.8 percent at 2,858.06
Pound/dollar: UP at $1.2740 from $1.2720 at 2040 GMT on Friday
Euro/dollar: UP at $1.1165 from $1.1156
Dollar/yen: UP at 110.25 yen from 110.02 yen
Oil – West Texas Intermediate: UP 94 cents at $63.70 per barrel
Oil – Brent Crude: UP $1.09 at $73.30 per barrel
New York – Dow: DOWN 0.4 percent at 25,764.00 (close)
London – FTSE 100: DOWN 0.1 percent at 7,348.62 (close)