Asian stocks creep higher as tariff concerns cloud over US-Mexico optimism

Sydney — Asian shares crept marginally higher on Wednesday as optimism over the US-Mexico trade deal was quickly clouded by caution ahead of a looming deadline on tariffs with China.

A flat finish on Wall Street and a dearth of major economic data across the region made for thin trade and MSCI’s broadest index of Asia-Pacific shares outside Japan eked out a rise of 0.26%. E-mini futures for the S&P 500 edged up 0.16%, while Chinese blue chips dipped 0.24%. Japan’s Nikkei fared better than many with a rise of 0.6% but faced stubborn resistance around 23,000, a level where it has failed repeatedly in recent months.

“For the Nikkei to break and remain above the 23,000 mark, trade conflict concerns will have to subside more convincingly,” said Hiroki Takashi, chief strategist at Monex Securities.

“While recent Nafta [North American Free Trade Agreement] talks have helped, the US and China will have to resolve their trade dispute to convincingly ease market concerns.”

Analysts at JPMorgan noted the deadline for public comment on US President Donald Trump’s increased tariffs on $200bn of Chinese goods was less than a week away on September 5.

“End-of-month flows could start to take hold into the end of the week, and combined with light news flow and the risk of impending trade war escalation could result in conviction remaining light,” they cautioned.

In Washington, Canada’s main trade negotiator was in talks to preserve a three-nation Nafta following Monday’s deal between the US and Mexico.

Trump warned that he could proceed with Mexico alone and levy tariffs on Canada if it does not come on board with the revised trade terms.

It’s not a done deal

Yet even if Trump were to go with Mexico alone, Congress would have to approve the deal in a process that would take months and put it beyond the midterm elections.

“In a nutshell it seems that many contentious issues remain unresolved and there is a very tight timeline that needs to be followed if a Nafta deal is to be ratified by the current US Congress,” NAB analysts said in a note.

The White House has also said it wants to settle Nafta before dealing with China, suggesting that trade dispute could run well into 2019.

Major currencies were quiet, with the dollar index all but flat at 94.718 after touching a four-week low overnight.

It was going nowhere on the yen at ¥111.24, having spent the past three sessions in a ¥110.93-¥111.49 range.

The euro held at $1.1693 after topping out at $1.1733 overnight. It faces stiff resistance in the $1.1750-$1.1790 zone and lingering concerns over Italy where political uncertainty drove bond yields toward three-month highs.

In commodity markets, spot gold was hovering around $1,203.81/oz after running into profit-taking at $1,214.28, its highest level since August 10.

Oil prices dithered either side of flat as falling supplies from Iran ahead of US sanctions balanced rising production outside oil cartel Opec.

Brent added 2c to $75.97 a barrel, while US crude rose 6c to $68.59.

Reuters