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Asian markets build on trade talks rally, Turkish lira holds up
HONG KONG, Sept 14, 2018 (BSS/AFP) – Asian markets extended their gains
Friday on hopes for China-US trade talks, while Turkey’s lira held up after a
shock hike in the country’s interest rate and a dip in US inflation.
After a tumultuous start to the month, investors finally had something to
smile about Thursday after US Treasury Secretary Steven Mnuchin invited
Chinese officials for fresh talks to avert an all-out trade war.
The news provided some much-needed support, which was improved on later in
the day with data showing US consumer price inflation slid in August, easing
pressure on the Federal Reserve to tighten borrowing costs.
While the central bank is expected to lift rates next month, the figures
lower the chances of another such move before January and provided a boost to
equities on Wall Street.
It also gave some breathing space to emerging markets, which have been
battered in recent weeks by fears of contagion from crises in Turkey,
Argentina and South Africa as a stronger dollar makes it harder for them to
repay debts.
“Hope springs eternal for emerging markets anytime the US dollar weakens
and (Thursday) was no exception,” said Stephen Innes, head of Asia-Pacific
trading at OANDA.
“As indeed the stars aligned for emerging markets assets after an
astonishing interest rate hike from the Central Bank of Turkey… and an
exceedingly soft US (inflation) data.”
– Remain cautious –
The CBT ramped up interest rates to 24 percent from 17.5 percent Thursday
as it struggles to fight off inflation and boost the lira, which is down
around 40 percent this year.
The surprise move — an indication the CBT wanted to show its independence
from strongman President Recep Tayyip Erdogan — sent the lira surging to
6.01 to the dollar from 6.4 and the currency managed to hold its gains in
Asian trade.
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Other high-yielding currencies also rallied with India’s rupee well off
recent record lows and the Indonesian rupiah up after touching a 20-year
trough. Mexico’s peso and the South African rand were more than one percent
higher, while the South Korean won added 0.5 percent and Australian dollar
gained 0.3 percent.
The positive sentiment from Thursday continued into the weekend on equity
markets, with Tokyo ending 1.2 percent higher and Sydney 0.6 percent up.
Hong Kong rose one percent, adding to the previous day’s 2.5 percent rise,
while Seoul surged 1.4 percent and Singapore gained 0.9 percent. Wellington,
Taipei, Bangkok and Jakarta also enjoyed healthy advances.
Shanghai dipped 0.2 percent, though, while Manila fell 0.7 percent with
investors fretting as Super Typhoon Mangkhut barrels towards the northern
Philippines.
But while traders are upbeat, Hannah Anderson, global market strategist at
JP Morgan Asset Management, warned against being too hopeful, with the US
still considering imposing tariffs on $200 billion of Chinese imports.
“Markets need to separate trade rhetoric and trade actions,” she said.
“While heated rhetoric may contribute to the shifting investor
expectations we have seen this week, there has been no fundamental change in
the state of the US-China trade dispute,” Anderson added.
“The US is pressing ahead with tariffs… and China’s qualitative
restrictions on US companies operating in China are starting to show up as a
drag in business surveys.
“China and the US both need to clarify what their goals are in this
dispute for us to be hopeful about a near-term resolution.”
In early European trade London, Paris and Frankfurt each rose 0.5 percent.
– Key figures around 0810 GMT –
Tokyo – Nikkei 225: UP 1.2 percent at 23,094.67 (close)
Hong Kong – Hang Seng: UP 1.0 percent at 27,286.41 (close)
Shanghai – Composite: DOWN 0.2 percent at 2,681.64 (close)
London – FTSE 100: UP 0.5 percent at 7,315.19
Euro/dollar: UP at $1.1719 from $1.1689 at 2100 GMT
Pound/dollar: UP at $1.3130 from $1.3105
Dollar/yen: DOWN at 111.83 yen from 111.94 yen
Oil – West Texas Intermediate: UP 16 cents at $68.75 per barrel
Oil – Brent Crude: DOWN two cents at $78.16 per barrel
New York – Dow Jones: UP 0.6 percent at 26,145.99 (close)
BSS/AFP/HR/1425