AFP /Hong Kong
A series of tweets by Donald Trump playing up the chances of a trade deal with China provided a much-needed boost to Asian equities yesterday but investors trod cautiously as analysts warned of more volatility to come.
After more than doubling tariffs on $200bn of Chinese goods last week – sparking retaliation from Beijing – the US president has threatened to hit a further $300bn with more levies if he does not get his way in high-stakes talks.
However, in a series of tweets Tuesday, Trump gave markets some hope that a deal between the economic titans will eventually be struck.
“When the time is right we will make a deal with China”, he wrote, adding that his “respect and friendship with President Xi (Jinping) is unlimited”.
He went on to say: “We can make a deal with China tomorrow, before their companies start leaving so as not to lose USA business” and said it would be “game over” if the Federal Reserve “matched” Chinese support measures.
The remarks, while again accusing China of backsliding in the trade talks, provided some optimism, while weak data out of China on industrial output, retail sales and investment highlighted weakness in the economy but fuelled hopes for growth-boosting measures.
Shanghai ended 1.9% higher at 2,938.68 and Hong Kong put on 0.5% at 28,268.71.
“This sharp slowdown increases the likelihood that we will probably see further attempts by China to help stimulate its economy, as well as raising concerns that any hopes of a Chinese economic rebound helping to prompt a global pickup in economic activity look a little bit forlorn at this point in time,” said Michael Hewson, chief market analyst at CMC Markets UK.
Tokyo climbed 0.6% at 21,188.56 points at close yesterday, Sydney rose 0.7% and Seoul added 0.5%.
Seoul, Taipei, Wellington, Manila and Mumbai were also well in positive territory but Singapore and Jakarta fell. Both the US and China have said they will resume talks in Beijing but with no date yet set, dealers are looking ahead to a possible meeting between Trump and Xi at the G20 in Japan at the end of June.
“It’s just too early to tell if this is a buy (on equity markets), on slightly oversold conditions, or if it’s the start of stabilisation,” Gina Martin Adams, chief equity strategist at Bloomberg Intelligence, told Bloomberg TV. “Our working thesis is that we’re going to be in for a period of volatility for most of the next month as we await the G20 meeting.”
And OANDA senior market analyst Jeffrey Halley warned that “sentiment remains fragile and subject to the whims of trade headlines on either news tickers or social media accounts”.
He added that while some gains could be expected “one suspects a lot of money will remain on the sidelines as we await more clarity on the trade situation”.
Oil prices dipped in Asian trade yesterday following a surprising rise in US crude stockpiles but remain propped up by tensions in the Middle East.
Major producer Saudi Arabia said Tuesday a pumping facility on the Red Sea had been attacked by armed drones, an act claimed by Yemeni rebels. That came days after sabotage attacks on four ships, including two Saudi Arabian oil tankers, in the United Arab Emirates.
“Trade issues will continue to cap gains in Asia, but if anything, the incidents on opposite sides of Saudi Arabia will bring home how vulnerable the flow of oil is from the Middle East,” said Halley.
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