Asian investors gave a cool welcome on Monday to the much-hyped Sino-US trade agreement, with observers saying they were still waiting for details, while the pound built on gains after last week’s general election win for Prime Minister Boris Johnson.
The world’s two economic superpowers on Friday said they had finally reached a partial deal that will cool down their long-running tariffs row, cancelling the imposition of fresh measures and winding back some others.
Anticipation that a pact was near helped fire global markets towards the end of last week, but selling began soon after the announcement was made with Wall Street finishing flat.
Under the agreement, US President Donald Trump agreed to cancel tariffs due on Sunday and lower levies already in place, while China committed to purchases of US manufactured merchandise, energy goods and farm exports, with the text due to be signed early next month.
US Trade Representative Robert Lighthizer hailed Trump’s “remarkable” achievement but Asian markets, which enjoyed huge gains on Friday, struggled to gain traction at the start of the week as investors await specifics on the pact.
“There is a lot to be seen in the weeks and months ahead whether we are going to be able to actually deliver on the phase one deal that we just went through,” Concord Financial Group managing partner Ephie Coumanakos told Bloomberg TV. “We don’t know all of the specifics.”
Tokyo ended 0.3 per cent lower, Hong Kong dropped 0.7 per cent, Seoul and Wellington each shed 0.1 per cent and Manila dropped more than one per cent. Bangkok and Mumbai also retreated. The Cambodia Securities Exchange index gained 0.52 per cent.
‘End of the beginning’
But Shanghai advanced 0.6 per cent following forecast-beating data out of China on the key retail and industrial sectors. Sydney climbed 1.6 per cent, while Taipei and Jakarta also rose.
“Yes, we have a deal, but trade negotiations will continue,” said Stephen Innes at AxiTrader. “For now, escalation seems to be off the table. However, the path to the comprehensive agreement is still miles away.
“Ultimately, the phase one deal fell short of market expectations and is probably not enough to fully restore business confidence or generate a meaningful recovery in exports or investment.”
Sterling held up but was down slightly from Friday’s 18-month highs against the dollar and more than three-year peak on the euro after Johnson’s crushing election win on Thursday that will allow him to push through his Brexit agreement.
The removal of uncertainty surrounding Brexit allowed markets to breathe a huge sigh of relief, though analysts said the saga still has some way to run.
Quentin Fitzsimmons at T Rowe Price said: “This is just the end of the beginning. The real work of negotiating the UK’s future trading relationship with the EU lies ahead and that has the potential to become very complicated.”
In early trade London and Frankfurt each rose 0.5 per cent, while Paris added 0.6 per cent.