‘Very good’ trade talks lift Asian shares

Shanghai — Asian shares rose on Friday after US President Donald Trump said he would meet China’s top trade negotiator, stirring hope for an agreement, while sterling was flat after earlier jumping on optimism over a potential Brexit deal.

Investors’ renewed appetite for riskier assets continued to weigh on the safe-haven yen and US treasury prices, while oil stayed firm on comments about possible supply cuts from the head of Opec.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.2%, following on from gains on Wall Street. S&P e-mini futures added more than 0.3%.

Australian shares climbed 0.8%, while Japan’s Nikkei stock index gained 1%. Chinese blue-chips added 0.5%.

The bullish market mood came after a first day of trade talks between top US and Chinese negotiators, characterised by Trump as “very, very good.”

A White House official said the talks had gone “probably better than expected” and a US Chamber of Commerce official briefed by both sides raised the possibility of a currency agreement this week.

Even before Trump’s comments, hopes for an agreement helped to lift US markets. The Dow Jones Industrial Average added 0.57%, the S&P 500 gained 0.64% and the Nasdaq Composite rose 0.6%.

But while optimism around trade talks helped to drive a “classic risk-on session” overnight, the lack of runaway enthusiasm reflected broader investor caution, said Matt Simpson, senior market analyst at GAIN Capital in Singapore. “We know that it’s just a few words from Trump.”

Further positive developments in trade talks could boost markets on Monday, but low expectations for a deal mean that the lack of an agreement would not “necessarily [be] the end of the world for risk,” he added.

Analysts at National Australia Bank said freezing tariffs at current levels would be unlikely to reverse the trade-driven slowdown in economic growth.

“The uncertainty around unresolved structural issues such as IP [intellectual property] theft and subsidies to state-owned enterprises are likely to remain deterrents for a pickup in much needed capital expenditure. On this score details on a potential currency pact will be important,” they said in a morning note.

On Friday, the dollar was little changed against the yen at 107.98, while the euro gained 0.1% to buy $1.1015. The pound was slightly lower, fetching $1.2436.

The dollar index, which tracks the greenback against a basket of six major rivals, was down at 98.655 after posting its biggest daily drop in five weeks on waning safe-haven demand for the currency.

The British pound had jumped nearly 2% on Thursday, its biggest daily gain since March, after Irish Prime Minister Leo Varadkar said a Brexit deal could be clinched by the end of October after what he called a very positive meeting with his British counterpart, Boris Johnson.

The move away from safe havens also lifted the yield on benchmark 10-year Treasury notes to 1.6733% compared with a US close of 1.656% on Thursday. Yields rose across the curve, with two-year notes yielding 1.5464% compared with a US close of 1.53%.

In commodity markets, oil prices remained higher after the head of Opec said the organisation could take action to balance oil markets, including a deeper cut in oil supplies, and amid hopes that progress towards ending the US-China trade war could help to revive economic growth and lift fuel consumption.

US crude was up 0.52% to $53.83 a barrel and global benchmark Brent crude was up 0.49% at $59.39 per barrel.

Gold, which had found its appeal tarnished by rising risk appetite, recovered some ground, with spot gold trading up 0.1% at $1,495.36/oz.

Reuters