Asia looks on bright side of Brexit, trade talks

Sydney — Asian shares made guarded gains on Tuesday amid optimism about prospects for a Sino-US trade deal, while investors were sanguine yet another vote on Brexit would still avert a hard exit for Britain.

A holiday in Tokyo kept turnover light and MSCI’s broadest index of Asia-Pacific shares outside Japan added a modest 0.4%.

Futures for Japan’s Nikkei were trading at 22,760, compared to Monday’s index close at 22,548. South Korean stocks rose 0.9% but Shanghai blue chips slipped 0.2%.

E-Mini futures for the S&P 500 gained 0.17% and Euro Stoxx 50 futures 0.14%.

China and the US have achieved some progress in their trade talks, vice-foreign minister Le Yucheng said on Tuesday, adding that as long as both sides respected each other, no problem could not be resolved.

US President Donald Trump sounded upbeat on a China deal on Monday, while White House adviser Larry Kudlow said tariffs on Chinese goods scheduled for December could be withdrawn if talks go well.

Trade-sensitive technology stocks rose 1.1%, helping lift the S&P 500 0.69% and near to a record closing high. The Dow gained 0.21%, while the Nasdaq rose 0.91%.

The better mood saw safe-haven bonds extend their recent pullback, with 10-year Treasury yields at a five-week peak of 1.80%.

In foreign exchange markets, the dollar found support against the yen at 108.64 while staying steady on a basket of currencies to 97.297.

The euro paused after its recent run higher and was last trading quietly at $1.1151.

Sterling held firm at $1.2980 after Prime Minister Boris Johnson failed to get a vote on his Brexit deal and will try again on Tuesday to get the first stage of a withdrawal bill through the British parliament.

“If the House of Commons vote in favour of the deal, GBP/USD could rally towards $1.3500 over the medium term. The UK would then enter a transition period that lasts until 31 December 2020,” said Kim Mundy, a currency strategist at CBA.

“If the Commons rejects the deal, GBP/USD is likely to stabilise around $1.2800, because the risk of a hard Brexit will remain low,” he said. “Early UK general elections would be the next most logical way forward.”

The Canadian dollar kept its recent gains at C$1.3076 per US dollar as CBC TV predicted the ruling Liberal government of Justin Trudeau had won re-election but with a minority government.

In commodity markets, spot gold was idling at $1,484.25 an ounce.

Oil prices were little moved as the market fretted about the health of the global economy and the future for energy demand.

Brent crude futures were down 2c at $58.94, while US crude added 4c to $53.35 a barrel

Reuters