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Asian markets bounce on bargain buying as dollar extends rally
NEW YORK, July 12, 2018 (BSS/AFP) – Asian markets on Thursday recovered
from the previous day’s hammering, oil prices bounced and the dollar extended
a rally on the back of expectations the US is better prepared to deal with a
trade war with China.
While investors remain on edge about a damaging standoff between the
world’s two economic superpowers, there are hopes the two sides will avoid an
escalation despite Donald Trump threatening tariffs on a further $200 billion
of Chinese goods.
The optimism helped bargain buying Thursday, with Tokyo ending the morning
session more than one percent higher, Hong Kong adding 0.5 percent and
Shanghai rallying 1.3 percent.
Sydney, Singapore, Seoul and Taipei were also deep in positive territory.
However, Stephen Innes, head of Asia-Pacific trading at OANDA, warned “we
are little more than a headline away from another risk-off episode” and added
that markets will likely remain volatile for some time.
“The prospects of another round of US tariffs directed at China have
resurrected fears that the trade skirmish between Washington and Beijing
could escalate with some investors now fearing a full-blown global trade war
could be a reality,” he said.
“But the most damning signal is that dialogue… is pretty much non-
existent and with a diplomatic solution appearing more unlikely as the days
go by markets will remain on the defensive.”
Japan’s Nikkei has been given an extra nudge by a weaker yen, which helps
exporters.
Despite the currency’s popularity as a safe have in times of turmoil, the
yen is at a six-month low against the dollar, which is getting support from
the robust US economy.
– Settlement hopes –
While most other countries are seeing improvement, data shows the US is
surging as jobs creation picks up and wages rise. News that producer price
inflation hit a more than six-year high in June added to expectations the
Federal Reserve will hike interest rates again soon, in turn strengthening
the dollar.
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The strong readings coming out of Washington suggest the US is in a much
stronger position to fight a trade war with China, which is battling slowing
growth and a crippling debt mountain among other things.
But Marito Ueda, senior dealer at FX Prime, said there are also hopes for
a China-US deal to avoid a trade war.
“Even though concerns remain over US-China trade frictions, the dollar
remains stronger (against the yen) as traders believe there will be a
political settlement at some point to avoid an all-out trade war,” he told
AFP.
The US unit was also up against the pound and euro as well as most other
high-yielding currencies.
On oil markets both main contracts edged up after being sent into freefall
Wednesday — Brent dived around six percent and WTI shed about five percent –
– by worries about the stronger dollar and the impact of a trade war on
demand.
The selling was fanned by news that major producer Libya had resumed
exports from four eastern ports following a disruption caused by clashes in
the war-torn country.
In Hong Kong, Chinese telecoms equipment maker ZTE cruised 20 percent
higher as it moved a step closer to having US sanctions lifted by signing an
agreement to put $400 million in escrow to cover any future violations.
The move comes after it agreed to pay a $1 billion fine and make the
escrow placement in return for the lifting of a seven-year ban on US firms
selling to it, which had put in on the edge of collapse.
– Key figures at 0300 GMT –
Tokyo – Nikkei 225: UP 1.1 percent at 22,174.92 (break)
Hong Kong – Hang Seng: UP 0.5 percent at 28,458.51
Shanghai – Composite: UP 1.3 percent at 2,814.13
Dollar/yen: UP at 112.24 yen from 112.01 yen
Euro/dollar: DOWN at $1.1676 from $1.1700 at 2045 GMT
Pound/dollar: DOWN at $1.3196 from $1.3205
Oil – West Texas Intermediate: UP 21 cents at $70.59 per barrel
Oil – Brent Crude: UP $1.04 at $74.44 per barrel
New York – Dow: DOWN 0.9 percent at 24,700.45 (close)
London – FTSE 100: DOWN 1.3 percent at 7,591.96 (close)
BSS/AFP/HR/0940