Asian shares pick up on U.S.-China trade deal hopes

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SYDNEY (Reuters) – Asian shares edged higher on Monday after U.S. President Donald Trump said over the weekend that trade talks with China were moving along “very nicely”, though uncertainty remained over whether a deal would be signed this year.

Asian shares pick up on U.S.-China trade deal hopes

FILE PHOTO: A passerby walks past in front of a stock quotation board outside a brokerage in Tokyo, Japan, May 10, 2019. REUTERS/Issei Kato

Japan’s Nikkei .N225 was up 0.2% to inch closer to a recent 13-month high. Australian shares rose 0.5% to a two-week high while South Korea’s KOSPI .KS11 was off 0.2%.

That left MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS 0.05% firmer at 534.63, testing a recent six-month peak.

Trump told reporters on Saturday that talks with China had moved more slowly than he would have liked, but added that Beijing wanted a deal more than he did.

That was a more upbeat tone than just a few days earlier when Trump stressed that the White House would not agree to a full rollback of existing tariffs, remarks that hit stock prices and the dollar.

“Despite his bluster that ‘China wants a trade deal more than I do’, markets sense that Trump is likely quite keen to call a truce on what is becoming a serious U.S. economic risk heading into the 2020 election year,” said David Bassanese, Sydney-based economist at Betashares.

By the close of Wall Street on Friday, optimism had returned to the market as investors bet that Washingon needs a deal and it is in the interests of China, too. All three major U.S. indexes eked out record closing highs.

The Dow .DJI inched up a tad while the S&P 500 .SPX climbed 0.3% and the Nasdaq Composite .IXIC added 0.5%. The record closing high by the S&P 500 was the fourth in six sessions as U.S. stocks rallied on hopes of a trade deal.

In early Asian hours on Monday, E-minis for the S&P500 ESc1 were barely changed.

“Focus this week will again be on any reports on U.S.-China trade negotiations,” Bassanese said. “There is still a lingering risk that talks could fail once again, in which case the recent risk-on global sentiment could be quickly unwound.”

U.S. officials said a lot of work remained to be done when Trump announced the outlines of an interim deal last month, and Beijing has since pushed back on U.S. demands for big agricultural purchases, among other issues.

Analysts said the outlook for equities was highly dependent on U.S. economic data as a U.S.-China trade agreement would help bolster manufacturing and industrial sectors.

Data on October U.S. industrial production and retail sales, along with the National Federation of Independent Business’s monthly small business survey, are scheduled for release this week.

Reflecting growing economic optimism, the benchmark 10-year Treasury yield US10YT=RR has moved well off its early September lows, and the yield curve between 3-month bills US3MT=RR and 10-year notes has steepened.

Safe haven gold was near a three-month low touched on Friday after posting its biggest weekly decline in a year. It was last up a touch at 1460.77 an ounce. XAU=

Benchmark Brent crude LCOc1 fell 9 cents to $62.42 a barrel while West Texas Intermediate (WTI) crude CLc1 slipped 10 cents to $57.14 a barrel.

In currencies, action was muted.

The dollar index =USD was mostly flat at 98.346 as was the euro at $1.1023. The Japanese yen JPY= held at 109.19 while the Australian dollar AUD=D3 stayed stuck at $0.6859.

Reporting by Swati Pandey; editing by Jane Wardell