Asian markets rise as traders focus on the positives

HONG KONG (AFP) - Asian equities rose yesterday as investors went into the weekend on an upbeat note, with an eye on the easing of lockdowns and mostly improving economic data, which offset geopolitical tensions and second wave worries.

Reports that China pledged to ramp up its purchase of US agricultural goods as part of its phase one trade deal also provided support to investors.

After three months of big gains across the planet fuelled by the reopening of economies as well as trillions of dollars in government and central bank support markets appear to be levelling out as investors await the next major catalyst, such as a vaccine.

But, while countries continue to ease business and jobs-destroying containment measures the virus is spiking in several places including Beijing, Tokyo, Germany, Florida and Texas. “Concerns over the spread of COVID-19 in some US states in particular where hospitalisation rates are rising, and also following the recent outbreak in Beijing, continue to cast something of a pall over markets,” said Ray Attrill at National Australia Bank.

Adding to the unease are simmering tensions between the two Koreas as well as China and India following a deadly border skirmish this week in the Himalayas.

Donald Trump provided fresh uncertainty Thursday by tweeting that the US “certainly does maintain a policy option, under various conditions, of a complete decoupling from China. Thank you!”

The message came a day after his trade representative and China hawk Robert Lighthizer told a congressional committee that China so far has been living up to the terms of a “phase one” agreement that eased the dispute, and that decoupling the two economic giants was now impossible.

While observers see it unlikely the superpowers would break off all economic activity, the comments were the latest volley from Trump over China as he aims for re-election in November.

However, Bloomberg News said Friday that Beijing planned to boost its imports of farm goods including soybeans and corn from the US, easing concerns about the trade pact signed in January, which had been called into question owing to rising tensions between the superpowers.

After a slow start to the day, Asian markets pushed higher to end the week on a healthy note.

Hong Kong was up 0.7 percent, Shanghai finished one percent higher and Tokyo put on 0.6 percent, while Sydney edged 0.1 percent higher.

Mumbai jumped 0.9 percent, Seoul added 0.4 percent and Jakarta and Wellington were 0.3 percent stronger, though Singapore and Manila slipped. London, Paris and Frankfurt all posted early gains.

“Local investors will feel encouraged by Chinas rapid response to curtailing the virus spread in Beijing, something that we will likely see across the region when other small outbreaks emerge,” said Stephen Innes at AxiCorp.
“Great for consumer confidence, knowing that the small outbreaks are quickly contained while the practice of social-distancing measures will keep the curve flat until a vaccine is in hand.”

But Kate Moore, at BlackRock, said there was too much uncertainty on trading floors to have any confidence in what will happen in the future.

“No one at this point, analysts, companies, strategists, portfolio managers, has a great sense for what earnings will be in 2020 or in 2021,” she told Bloomberg TV. “We are experiencing a lot of dislocations in the economy and consumption patterns and it is pretty difficult to predict.”

On currency markets the pound struggled to bounce back from Thursday’s drop that came after the Bank of England unveiled an extra £100 billion of cash stimulus to prop up the economy, which met forecasts but analysts said traders were disappointed by a lack of forward-looking reassurance.

Oil prices rallied to extend the previous day’s gains on optimism over the demand outlook as lockdowns are eased, and despite worries over possible fresh infections. 

“What’s become clear this week is that any second wave isn’t going to necessarily prompt governments to return to draconian lockdowns,” Vandana Hari, at Vanda Insights, said. “The market is quite reassured when it comes to tightening supply” from major producers in and outside of OPEC.