ASIAN markets were mixed on Tuesday with investors cautiously optimistic that China and the US can reach a deal ending their trade war as the two sides prepare to resume talks this week.
With New York closed for a public holiday there were few catalysts to drive buying, though the release of Federal Reserve minutes on Wednesday will be pored over for an idea of the bank’s interest rate plans.
Top-level officials from the world’s two biggest economies will reconvene in Washington after a series of talks in Beijing last week, with the US side telling President Donald Trump they had been “very productive”.
The positive tone from the diplomats, and the president’s indication he could extend a deadline for agreement, boosted regional markets on Monday, extending a 2019 rally fuelled by optimism about an end to the nearly year-long tariffs spat.
Tokyo finished 0.1 per cent higher, Hong Kong shed 0.4 per cent and Shanghai closed 0.1 per cent up.
Sydney gained 0.3 per cent, Singapore put on 0.2 per cent and Taipei 0.2 per cent, with Seoul and Wellington each off 0.2 per cent. Manila fell while Mumbai and Jakarta were up.
In early trade London and Frankfurt each fell 0.2 per cent while Paris was off 0.1 per cent.
Britain’s Labour strife
However, Oanda senior market analyst Jeffrey Halley warned of trouble ahead if Chinese and US officials do not agree a deal.
“The rallies [on Monday] were impressive given the talks ended last week without any concrete results and have yet to even recommence in Washington this week due to the US public holiday,” he said.
“Without sounding like a damp squib, there is now a vast amount of ‘optimism’ baked into currency, stock and energy market prices globally and precisely zero concrete detail. The unwind, should no deal be struck, could be very ugly.”
Oil prices were mixed after rallying on Monday on trade talks hope and signs that Opec and other key producers are narrowing output.
“Saudi Arabia seems willing to do whatever is necessary to reach levels of $80 per barrel, and judging by the price reaction, they’re on track,” said Commerzbank AG commodities research head Eugen Weinberg.
“Even rather bearish factors, like a stronger-than-expected rise in US oil production, does not seem to derail the price recovery.”
On currency markets the pound was down, with uncertainty fanned by news that seven pro-remain MPs had split from Britain’s opposition Labour Party over its handling of Brexit and a row over anti-Semitism.
The move “looks awfully like a bungled mess of the creation of a new party, which we think is more likely to be pound-negative . . . by giving Brexit a less effective opposition,” Peter Chatwell, head of European rates strategy at Mizuho International, told Bloomberg News.
He added that it left both main parties “with clear pro-Brexit mandates”.