Asian markets boosted by fresh trade hopes after troubled week

(Hong Kong) AFP: Renewed hopes for trade talks boosted most Asian equities yesterday after China said it would not retaliate against the latest US tariffs, setting up a positive end to a volatile week.

However, the arrest of activists in Hong Kong fuelled fresh worries about violent protests in the city and wiped out an early rally.

With huge levies on goods worth hundreds of billions of dollars due to kick in over the weekend, the long-running trade war between the world’s top two economies steps up a gear, and observers are fretting the row could drag on.

But Beijing on Thursday appeared to want to dial down the tensions, saying it would hold off on responding in kind, as it has previously warned it would do.

“The escalation of the trade war is not beneficial to China, and it is not beneficial to the United States,” commerce ministry spokesman Gao Feng said.

Later, President Donald Trump said talks between the two were planned for later Thursday, though there was no indication any had taken place by late Asian trade.

The news came as a big relief for markets, which have been hit by volatility over the standoff after both sides last week unveiled fresh tariffs, with Trump slamming Beijing but days later saying they had held phone talks and negotiations would resume soon.

“The more measured tone in deciding to focus on next month’s meeting to discuss removing the extra duties has seen some optimism start to creep back in,” said Michael Hewson, chief market analyst at CMC Markets UK.

All three main US indexes ended with steep gains, which filtered through to Asia.

Tokyo rose 1.2 percent, Sydney and Taipei each piled on 1.5 percent, Seoul jumped 1.8 percent and Wellington gained 1.7 percent. Manila, Bangkok and Jakarta also posted healthy gains.

But after starting the day more than one percent higher, Hong Kong finished just 0.1 percent up as investors fret over the reaction to the arrest of leading democracy campaigners.
“Now people really fear emergency law could be implemented in Hong Kong,” said Jackson Wong, asset management director at Amber Hill Capital. “Property stocks are sold most, because if Hong Kong is not different from other Chinese cities, it’s hard to retain talent. And property prices won’t find support.”

Shanghai was also hit, ending down 0.2 percent.

In early trade, London added 0.2 percent, Frankfurt rose 0.4 percent and Paris was up 0.5 percent.

Dealers brushed off data showing the US economy grew at a slower pace than initially thought in the second quarter. Those figures were soothed by the fact that consumer spending remained strong.

OANDA senior market analyst Jeffrey Halley added that while the 0.1 percentage point downward revision to the growth figure was small, “without the Chinese comments, investors would probably have continued streaming for the exit door”.

“All-in-all it emphasises once again that the US-China trade dispute... remains the only game in town for investors globally, with data a secondary player.”

The easing tensions helped China’s yuan strengthen slightly against the dollar, having fallen to an 11-year low earlier in the week.

And on oil markets, both main contracts fell after surging over the previous three days thanks to the latest developments on the trade talks as well as a plunge in US stockpiles that pointed to improving demand.