Asia mar­kets mostly down as China-US trade deal joy fades

Gulf Times Business - - BUSINESS -

Asian mar­kets mostly dropped yes­ter­day as the pre­vi­ous day’s eu­pho­ria over the China-US trade war cease­fire gave way to ques­tions about whether the two can ul­ti­mately re­solve their dif­fer­ences.

How­ever, oil prices con­tin­ued to rise, build­ing on Mon­day’s surge fu­elled by the agree­ment as well as news of a Rus­sia-Saudi Ara­bia pact to cap out­put.

Global in­vestors were given some much-needed Christ­mas cheer at the week­end af­ter Don­ald Trump and Xi Jin­ping called a halt to their painful tar­iffs bat­tle for 90 days while they try to re­solve their dif­fer­ences.

The news lit a fuse un­der mar­kets af­ter a tor­rid year that has been dom­i­nated by the trade war be­tween the world’s top two economies, which many fear will hit global growth.

How­ever, there is con­cern that the three-month grace pe­riod will not be enough for them to ham­mer out agree­ments on key is­sues, par­tic­u­larly on in- tel­lec­tual prop­erty pro­tec­tion. “Can the US and China re­ally re­solve their dif­fer­ences in 90 days?” asked Ro­drigo Ca­tril, se­nior strate­gist at Na­tional Aus­tralia Bank.

“It seems that more de­tails and signs of progress will be needed if the ini­tial trade truce warm fuzzy feel­ing is to be sus­tained.”

Also, later Mon­day there was un­cer­tainty about Trump’s claims in a tweet that China had agreed to slash tar­iffs on car im­ports, with two of his top ad­vis­ers un­able to pro­vide clar­ity on the is­sue.

“That’s what hap­pens when you don’t have the de­tailed ne­go­ti­a­tions go­ing into the sum­mit” and end up with the “broad swath of a 35,000-foot deal,” Bon­nie Glaser, a China ex­pert at the Cen­ter for Strate­gic and In­ter­na­tional Stud­ies in Wash­ing­ton, said.

“It’s risky. There’s cer­tainly no guar­an­tees that it will pro­duce the out­comes that we want.” And Stephen Innes, head of Asia-Pa­cific trade at OANDA said there was “com­plete con­fu­sion” over de­tails of the Trump-Xi deal.

Tokyo tum­bled 2.4% on profit-tak­ing and a strong yen, while Sydney and Sin­ga­pore shed 1% each. Seoul dropped 0.8%, while Taipei eased 0.5% and Welling­ton gave back 0.1%. How­ever, Hong Kong staged a late rally to end up 0.3%, while Shang­hai, Manila and Jakarta were also up.

In early Euro­pean trade Lon­don rose 0.4%, Paris dropped 0.3% and Frank­furt lost 0.4%. Jeff Klein­top, chief global in­vest­ment strate­gist at Sch­wab Cen­ter for Fi­nan­cial Re­search, re­mained up­beat.

“It’s easy to see the trade deal as a half empty (glass) — that it’s just a post­pone­ment and that they’ll work to­gether but that there re­ally isn’t any kind of res­o­lu­tion,” he said. “But I think you can see it as a half glass full.”

On oil mar­kets both main con­tracts posted more healthy gains, adding more than 1%, hav­ing racked up gains of al­most 4% on Mon­day on the trade deal, the Rus­sia-Saudi out­put agree­ment and a cut in pro­duc­tion in Canada.

Focus is now on a meet­ing of Opec and non-Opec mem­bers in Vi­enna at the week­end, where they will re­veal how much and for how long they will re­duce out­put as they look to stabilise the crude mar­ket. On currency mar­kets the pound is strug­gling to bounce back against the dol­lar with MPs pre­par­ing to de­bate Prime Min­is­ter Theresa May’s Brexit deal as she strug­gles to win over enough peo­ple to sup­port it.

Fail­ure to push the agree­ment through par­lia­ment could bring down her gov­ern­ment, fu­elling more un­cer­tainty in the coun­try.

The dol­lar slipped to 6.84 yuan, with the Chi­nese unit still en­joy­ing the pos­i­tive flow from the week­end’s news, hav­ing been close to the 7 per green­back level just a month ago.

The yuan has risen about 1.5% in the past two days.

The euro won some sup­port af­ter Italy’s Prime Min­is­ter Giuseppe Conte said a fresh bud­get that would avert Brussels penal­ties would be ready “in the com­ing hours”. The pop­ulist gov­ern­ment’s spend­ing plan had run foul of EU rules, lead­ing to a stand-off that threat­ened a cri­sis in the bloc.

In Tokyo, the Nikkei 225 closed down 2.4% to 22,036.05 points; Hong Kong — Hang Seng ended up 0.3% to 27,260.44 points and Shang­hai — Com­pos­ite closed up 0.4% to 2,665.96 points yes­ter­day.

An ex­ter­nal view of the Tokyo Stock Ex­change build­ing. The Nikkei 225 closed down 2.4% to 22,036.05 points yes­ter­day.

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