Asian shares rise slightly amid the expectation of good holiday sales

Tokyo — Asian stocks and US equity futures posted modest gains on Monday on the hope of solid US holiday sales, although plunging oil prices fanned worry about a dimming outlook for the global economy.

Investors were also cautious before US and Chinese leaders meet for crucial talks at the end of the week as trade tensions between the economic superpowers showed no signs of easing.

“The US-China summit is the biggest event for the rest of the year,” said Nobuhiko Kuramochi, chief strategist at Mizuho Securities.

MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.7%, led by gains in Hong Kong and Taiwan, while Japan’s Nikkei advanced 0.8%.

In China, the Shanghai composite index ticked up 0.3%.

US stock futures tacked on 0.4% in Asian trade, on hopes of brisk spending by US consumers on so-called Black Friday and Cyber Monday sales.

Shoppers across the US snapped up deep discounts on toys, clothing and electronics both online and at stores on Black Friday, giving retailers a strong start to their make-or-break holiday season.

US stock markets had another tough session on Friday, when the benchmark S&P 500 hit its lowest close in more than six months as the energy sector took a beating in the wake of the oil slump.

The S&P 500 fell 0.66% to end about 10.2% down from its September 20 closing record high, the second time this year it has entered a 10% correction after a rout in early February.

Oil prices were fragile, keeping near their lowest levels since October 2017, having dived 8% on Friday for the biggest weekly losses in almost three years as rising US production intensified fears of a supply glut.

So far in November, both WTI and Brent futures are down more than 21%, on track for their biggest fall since October 2008 unless they recoup some of those losses this week.

US crude futures last fetched $50.74 a barrel, up 0.6% on the day but still not far from Friday’s low of $50.15.

Brent crude futures last stood at $59.39 a barrel, near Friday’s low of $58.41.

‘Cold war’

US President Donald Trump and his Chinese counterpart Xi Jinping are expected to hold talks on the sidelines of a Group of 20 (G20) summit in Argentina at the end of November.

Barring any deals there, the US tariffs on $200bn goods, introduced in late September, are likely to be raised to a proposed 25% next year from 10%.

“July-September corporate earnings have hardly been affected by the latest tariffs. It’s in the next earnings that we will see the impact. And if the tariffs are raised further next year, earnings will be hit further,” said Mizuho’s Kuramochi.

Some market players say investor worries go well beyond trade issues, noting the decline in global stocks and oil prices began right after US Vice-President Mike Pence intensified pressure on China in a speech on October 4.

In that speech, Pence accused China of “malign” efforts to undermine Trump, and Chinese security agencies of masterminding the “wholesale theft of American technology,” including military blueprints.

“Pence’s speech is a start of the cold war,” said a currency trader at a US bank, meaning global supply chains would be put at risk.

“And we have a slowdown in iPhones sales and all that. Bearish factors are piling up,” he said.

Already, the global economy is showing cracks with businesses wary about investment amid the rising headwinds to earnings growth.

A survey on Friday showed euro zone business growth has been much weaker than expected in November as slowing global economic momentum and a US-led trade war have led to a sharp fall in exports.

IHS Markit’s Flash composite purchasing managers index for the eurozone fell to 52.4 in November, its lowest since late 2014.

That put pressure on the euro. The single currency traded at $1.1335, little changed in Asia after a 0.6% drop on Friday.

Germany’s 10-year bond yield also fell to 0.331% its lowest since early September.

The British pound hardly moved at $1.2818 after EU leaders sealed a Brexit deal on Sunday.

Markets are now looking to whether the deal can get through a fractious British parliament which is set to vote on it just before the next EU summit on December 13-14.

The yen edged down about 0.2% at ¥113.23 to the dollar on a rise in stocks.

The dollar’s index against a basket of six major currencies stood almost flat at 96.969, not far from this year’s top of 97.704 marked two weeks ago.

But it could lose momentum if Federal Reserve policymakers take a more cautious approach to future policy tightening. Chair Jerome Powell will speak on Wednesday while vice-chair Richard Clarida’s speech is due on Tuesday.

Reuters