Stocks make cautious gains ahead of summit
TOKYO - Asian stocks and Wall Street futures inched higher on Tuesday as some investors held out hope that Britain still had a chance to avoid a messy exit from the European Union at key negotiations this week.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.01 per cent. Australian shares were up 0.12 per cent, while Japan’s Nikkei stock index rose 1.38 per cent.
Capping the broader gains, however, was a perceived lack of progress coming out of US-China trade negotiations. Reports of a “Phase 1” trade deal between the United States and China last week had earlier cheered markets but the dearth of details around the agreement has since curbed this enthusiasm with oil prices extending declines and the safe-haven yen holding gains versus dollar.
The focus has now shifted to Europe where officials from Britain and the EU will meet at a make-orbreak summit on Thursday and Friday that will determine whether or not Britain is headed for a so-called no-deal Brexit.
“Given the parliamentary intervention, I would say the chance of a no-deal Brexit is around 10 per cent to 20 per cent,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors in Sydney.
“If there is a deal, sterling would rally and risk assets would rally, but the reaction could be limited to a day.”
US stock futures rose 0.19 per cent on Tuesday in Asia after the S&P 500 ended 0.14 per cent lower.
Traders, however, cautioned that sentiment remains fragile because the outcome of Brexit talks is far from certain and the US-China trade war remains a risk to global growth.
British Prime Minister Boris Johnson wants to strike an exit deal at an EU summit on Thursday and Friday to allow an orderly departure on October 31.
The main sticking point remains the border between EU member Ireland and Northern Ireland, which belongs to the UK. Some EU politicians have expressed guarded optimism that a deal can be reached.
However, diplomats from the EU have indicated they are pessimistic about Johnson's proposed solution for the border and want more concessions.
In the currency market, sterling held steady at $1.2608, below a threemonth high of $1.2708.