Thursday, 12 December 2019

Asian equities recover from 3-week lows

Photo: Reuters UK

SHANGHAI: Asian equities posted a mild bounce on Friday from three-week lows hit the previous day, with persistent worries over the status of trade negotiations between China and the United States limiting the gains.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS climbed 0.12%, recovering from Thursday’s drop of as much as 1.4% that took it to its lowest level since Oct. 30 on concerns that U.S. legislation on Hong Kong threatened to undermine trade talks between the world’s two largest economies.

Those concerns linger, with U.S. President Donald Trump expected to sign into law two bills backing protesters in Hong Kong after the U.S. House of Representatives voted 417 to 1 for the “Hong Kong Human Rights and Democracy Act”, which the Senate had passed unanimously a day earlier.

“If he’s going to be forced to sign it, then it brings another (element) of uncertainty to this phase one trade deal, which then pushes back into next year,” said Matt Simpson, senior market analyst at GAIN Capital in Singapore.

But Simpson said that in the absence of major news on trade, rangebound market moves are “quite reflective of the small headlines coming through”.

Chinese blue-chip shares .CSI300, which had opened higher, turned negative later in the morning, and were last down 0.82%.

Australian shares gained 0.55% and Japan s Nikkei .N225 was up 0.43%.

Worries that a “phase one” trade deal between the United States and China might not occur until next year had weighed on investor sentiment on Wall Street overnight, pulling the S&P 500 .SPX down 0.16% to 3,103.54, the Dow Jones .DJI down 0.2% to 27,766.29 and the Nasdaq Composite .IXIC 0.24% lower to 8,506.21.

The losses, though, were tempered by China saying it was willing to work with the United States to resolve core trade concerns, and a report in the Wall Street Journal that China has invited top U.S. trade negotiators for a new round of face-to-face talks in Beijing.

“I was ready to give up on a trade deal yesterday. But it seems the Chinese haven’t so I, we, mustn’t,” Greg McKenna, strategist at McKenna Macro, said in a note.

But analysts at ANZ said that whipsawing hopes over a deal were starting to wear on investors in the 16th month of the U.S.-China trade war.

“It’s fair to say that some signs of trade-headline fatigue are emerging in markets,” they said in a note.

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