Asian equities extend gains in wake of Wall Street records

Tokyo — Asian stocks extended gains on Friday after Wall Street’s S&P 500 set a new record high.

In currency markets, the dollar slipped as investors viewed Beijing’s and Washington’s fresh exchange of import tariffs as less harmful than initially feared.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2% in early trade, extending the recovery from its 14-month low hit on September 12 to 3.6%. Japan’s Nikkei rose 0.5%, hitting an eight-month high.

On Wall Street, trade-sensitive industrial stocks led the gains on Thursday. The Dow Jones industrial average rose 0.95% while the S&P 500 gained 0.78%, both hitting record highs.

The latest rally comes after new that US and Chinese tariffs on each other’s goods were set at lower rates this week than previously expected, raising hope that hostilities between the world’s two largest economies may be easing.

Despite the trade risks, the outlook on corporate profit remained solid in many markets due to strong global growth, keeping equity valuations relatively attractive.

“Of course, the trade war will continue. We have to see how much damage the tariffs will cause to China’s exports. But it will probably be the early next year that we will see that in hard data,” said Nobuhiko Kuramochi, chief strategist at Mizuho Securities.

“And any progress in Sino-US trade talks may have to wait until after the US midterm elections. This will be a long term issue,” he said.

MSCI’s ACWI, an index covering the world’s 47 markets, edged up 0.1% to near the five-and-a-half-month high hit at the end of August, having gained 1.4% so far this week.

Leading the gains were developed markets outside the US, which have risen 2.3% so far this week.

They outperformed US shares, which have risen 0.8%, reversing their underperformance since early May when trade disputes intensified.

In the currency market, the euro gained almost 1% on Thursday to hit a two-and-a-half-month high of $1.1785. It last traded at $1.1779.

The yen hit a two-month low of ¥112.585 to the dollar on Thursday and last stood at ¥112.51.

The pound climbed to as high as $1.3295, its highest since early July, after strong UK retail sales data.

The closely watched summit of the European Union produced little progress on the thorny issue of trade and the Irish border. EU leaders have warned British Prime Minister Theresa May that they are ready to cope with Britain crashing out of the bloc if she does not compromise.

Britain’s former Brexit minister David Davis has said up to 40 legislators from the ruling party will vote against May’s plans to leave the European Union, meaning she may struggle to get her deal through parliament.

The pound last stood at $1.3272.

Oil prices have pulled back after US President Donald Trump urged the Opec cartel to increase production at its meeting in Algeria.

US light crude was down 0.1% at $70.23 a barrel. Brent crude oil were little changed at $78.77 a barrel.

Reuters