Stocks, commodities recover after trade war jolt
TOKYO Stocks and commodities recovered slightly yesterday as markets tried to consolidate from the previous sessions steep losses when fears of an escalation in the US-China trade war jolted investor sentiment.
Spreadbetters expected European stocks to open higher, with Britains FTSE gaining 0.3 per cent, Germanys DAX adding 0.35 per cent and Frances CAC 0.4 per cent.
MSCIs broadest index of Asia-Pacific shares outside Japan rose 0.6 per cent.
The index slumped 1 per cent on Wednesday along with a slide in global equities after US President Donald Trumps threat to imposing tariffs on another US$200 billion of Chinese goods deepened the trade row between the worlds two largest economies.
Hong Kongs Hang Seng rose 1.0.per cent and the Shanghai Composite Index bounced 2.2 per cent.
Australian stocks rose 1 per cent, South Koreas KOSPI added 0.6 per cent and Japans Nikkei gained 1.3 per cent.
The markets had some time to digest the latest trade war developments and are poised to begin consolidating, said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.
It has become a pattern of reacting to each new development and hoping that trade strains ease in the next few months through negotiations, he said.
Focus turned to what the next steps in the tit-for-tat trade conflict might be. China has accused the US of bullying and warned it could hit back, although the form of retaliation was not clear.
The retaliatory options available to China include boycotting American goods, sharply devaluing the yuan, and selling off US Treasury holdings, Xiao Minjie, senior economist at SMBC Nikko Securities in Tokyo, wrote in a note.
But we believe none of these moves are realistic or productive... the wisest move in our view is for China to accelerate the opening of its market rather than continue to trade blows with the US.
Chinas yuan strengthened 0.3 per cent versus the dollar, partially recovering from a big slide the previous day and pulling back from 11-month lows brushed last week.
The yuan firmed after the currencys yesterday midpoint, set by the Peoples Bank of China, was not as weak as the market braced for.
It shows the central bank intends to stabilise the market and calm investors. One-way speculation on the yuans depreciation is not in Chinese authorities interests, said Qi Gao, Asia FX strategist at Scotiabank in Singapore.
The dollar was buoyant, supported by mounting trade tensions and Wednesdays strong US inflation data.
The dollar index against a basket of six major currencies was steady at 94.700 after gaining 0.6 per cent overnight.
Against the yen, which usually strengthens in times of political tension and market turmoil, the greenback stretched its overnight rally and rose to 112.385 yen, its highest since January.
The dollar has managed to gain even against the yen due to ongoing trade concerns, with commodity-linked currencies having slid along with the downturn in commodities and providing a broad lift for the dollar, said Ichikawa of Sumitomo Mitsui Asset Management.
Commodity-linked currencies such as the Australian dollar suffered deep losses on Wednesday. The Aussie crawled up 0.2 per cent to $0.7383 after dropping 1.2 per cent overnight.
The Canadian dollar was a shade higher at C$1.3201 per dollar following a loss of 0.75 per cent the previous day.
The euro was little changed at $1.1680 after shedding 0.6 per cent on Wednesday.
In commodities, Brent crude futures rose 1.5 per cent to $74.52 a barrel after tanking 6.9 per cent overnight, the biggest one-day percentage drop since February 2016 as trade tensions threatened to hurt oil demand and news that Libya would reopen its ports raised expectations of growing supply.
Copper on the London Metal Exchange rose 0.8 per cent to $6,194.00 a tonne. The industrial metal sank nearly 3 per cent on Wednesday, plumbing a oneyear low of $6,081.00. REUTERS