Asian markets mostly up; trade pact delay jolts investors
Credit to Author: Agence France-Presse| Date: Thu, 07 Nov 2019 13:00:33 +0000
HONG KONG: Asian markets mostly rose on Thursday, but investors were on edge after being spooked by speculation the much-anticipated signing of the China-US trade pact had run into a jam.
Broad optimism that the economic superpowers would soon complete part one of a wider agreement has been the basis of a rally in global equities for several weeks.
But that confidence was given a slight jolt by reports that a planned meeting between US President Donald Trump and Chinese President Xi Jinping to put pen to paper may be put back to December, as they iron out some issues and try to find a place to hold the ceremony.
The Financial Times and Wall Street Journal earlier said the White House was considering dropping existing tariffs on more than $100 billion of imports to seal an agreement.
While officials said the deal is still on track, a seed of doubt was planted in the minds of nervous traders, who have witnessed several false dawns in the past.
“One could take the view [that] by not committing to meet the original deadline for signing the so-called phase one agreement… it gives more time for a somewhat more comprehensive agreement to be thrashed out — potentially involving a US commitment to wind back some existing tariffs,” said National Australia Bank’s Ray Attrill.
“But markets have understandably jumped the other way, exhibiting a slight loss of confidence that anything more substantial than an agreement not to further lift tariffs — in return for some increase in US agricultural purchases — can be agreed.”
China’s ‘long game’
Wall Street ended flat and Asia struggled in early business but staged a slight recovery as the day wore on.
Tokyo closed 0.1 percent higher, Sydney added one percent and Singapore gained 0.1 percent in the afternoon with Wellington and Manila also in positive territory. Seoul, Shanghai and Bangkok barely moved.
Hong Kong fell 0.4 percent in late trade, after five days of gains, Taipei closed 0.4 percent lower, Jakarta lost more than 1 percent and Mumbai was off 0.1 percent.
“Traders are all too aware that China can play the long game,” said David Madden, an analyst at CMC Markets UK. “Trump is up for reelection in November 2020, so Beijing have no motivation to wrap things up quickly.
“Mr. Trump needs to be seen to be taking the economic fight to China, but he also needs stock markets to be strong, so this entire process is likely to go back and forth for many months to come.”
Oil prices stabilized after tumbling more than 1 percent on Wednesday in reaction to a bigger-than-expected build up in US reserves, as well as worries that major producers would not push for deeper output cuts.
With the Organization of the Petroleum Exporting Countries (OPEC) and other top producers led by Russia meeting next month, Bloomberg News cited sources as saying they were likely to maintain their current agreement for caps, which are due to run out in March, well into 2020.
The limits have helped support oil prices for years, in the face of weakening demand, the China-US trade war and slowing global economic growth.
“It will prove very difficult to formally agree new, deeper cuts,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas.
“A rollover of current cuts for the rest of 2020, with an emphasis on compliance by all members, is the path of least resistance.”