Asian shares edge up on hints of progress in trade talks

Sydney — Asian shares on Wednesday gave a guarded welcome to hints of progress in the Sino-US trade saga, while the dollar hit two-month highs on the euro as investors wagered on a dovish outcome from the European Central Bank’s coming policy meeting.

Sentiment had been helped by a Bloomberg report that US trade representative Robert Lighthizer would travel to Shanghai next week for meetings with Chinese officials.

White House economic adviser Larry Kudlow on Tuesday called it a good sign and said he expected Beijing to start buying US agriculture products soon.

Japan’s Nikkei added 0.5%, while Australian stocks rose 0.8% to all-time highs.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.4% and Chinese blue chips climbed 1.2%.

Not so welcome was news the US justice department was opening an antitrust investigation of major digital tech firms and possible anticompetitive practices. The department cited concerns about “search, social media, and some retail services online” — an apparent reference to Alphabet, Amazon.com and Facebook.

Facebook reports results on Wednesday and Amazon and Alphabet on Thursday.

Nasdaq futures fell 0.2% in Asian trade, while E-Mini futures for the S&P 500 eased 0.1%.

The news took a little of the gloss off a solid overnight session for Wall Street, where upbeat quarterly reports from Coca-Cola and United Technologies helped ease some concerns about earnings. The Dow had ended Tuesday up 0.65%, while the S&P 500 gained 0.68% and the Nasdaq 0.58%.

Stocks are just a whisker away from highs buoyed by expectations of a wave of policy stimulus by global central banks and a resulting sharp decline in bond yields.

The ECB is thought likely to at least offer a nod to easier policy at its meeting on Thursday.

Futures remain 100% priced for a rate cut of 25 basis points from the Federal Reserve next week, and even imply an 18% chance of 50 basis points.

Euro breaks down

The prospect of wide-scale central bank largesse helped take the sting out of the IMF’s latest downgrade to its global growth forecasts.

While yields on two-year Treasuries edged up to 1.837% overnight, they remain far below the cash rate and down 66 basis points for the year so far.

In currencies, the dollar got a hand up from a deal to end the US budget impasse, while the euro suffered a bout of nerves in case the ECB takes a more dovish turn.

The single currency was down near two-month lows at $1.1144, having shed 0.5% overnight, and hit a near seven-month trough on the yen at 120.45.

The dollar nudged up on the yen to 108.23, but stayed confined within recent well-worn ranges. Against a basket of currencies, the dollar firmed to a five-week top at 97.742.

Sterling loitered at $1.2433 having fallen for three sessions in a row as the outlook on Brexit got ever murkier. Boris Johnson is set to become Britain’s new prime minister later on Wednesday, but investors are no clearer on whether he would lead the country to a no-deal exit or find a compromise.

“His grip on power will be weak, given the status of a minority government,” noted analysts at NAB. “In our view, Johnson’s desire to push for Brexit, deal or no deal, increases the chance of an early general election and some possibly nasty GBP outcomes.”

Gold steadied at $1,421.76 per ounce, though it was still short of last week’s peak at $1,452.60.

Oil prices firmed after an industry group reported a surprisingly large drop in US inventories, while the US navy said it may have downed a second Iranian drone last week.

Brent crude futures added 18c to $64.01, while US crude rose 24c to $57.01 a barrel.

Reuters