HONG KONG, May 20 — Most Asian markets rose today after Donald Trump showed signs of conciliation in his trade wars but investors remain on edge over the China-US standoff with some concerns that talks between the two have stalled.
Mumbai equities and the rupee soared on the back of exit polls suggesting business-friendly Prime Minister Narendra Modi was on course to be re-elected.
Sydney stocks and the Australian dollar rallied after a shock win for the conservatives, while Japanese dealers were cheered by forecast-beating economic growth data.
However, the pound is wallowing around four-month lows on growing fears Britain will leave the European Union without a divorce deal.
Global markets have been in turmoil for two weeks since Trump threatened — and later delivered — a hike in tariffs on Chinese imports, to which Beijing retaliated and relit their debilitating trade battle.
The move also threw a spanner in the works for long-running negotiations between the economic superpowers that were thought to have been close to conclusion.
That was compounded by Trump’s decision to bar Chinese telecoms firms from the US market and added Huawei to a blacklist restricting US sales to the firm.
But there was a sliver of hope after Trump on Friday removed steel tariffs on Canada and Mexico and announced a six-month delay in imposing steep tariffs on auto imports as he seeks talks with Japan and the EU on the issue.
Most equity markets were in positive territory, with Sydney 1.7 per cent higher following the surprise victory of Prime Minister Scott Morrison’s Liberal-National coalition in weekend elections. The Aussie dollar also enjoyed support, climbing 0.7 per cent against the greenback.
Tokyo ended 0.2 per cent higher, with traders taking heart from news that the Japanese economy expanded more than expected in the first quarter and improved slightly from the previous three months.
Wellington added 0.5 per cent and Taipei was 0.1 per cent higher, with Jakarta one per cent up and Manila 0.6 per cent stronger.
However, Hong Kong shed 0.6 per cent and Shanghai was off 0.4 per cent, with Seoul marginally down.
Sterling under pressure
Still, Michael Metcalfe, global head of macro strategy at State Street, said markets could be ready for a healthy bounce.
“Right now, cash levels are at quite elevated levels and investors have money to put back into the market,” he told Bloomberg TV.
“That dry powder, that potential for cash to come back in, means that once we get a resolution of the trade war and once we start to see better economic data, as we’ve just seen in Japan for instance, then that money is going to get dragged back out of cash into the market.”
Mumbai piled on more than two per cent and the rupee jumped one per cent as polls indicated Modi’s Bharatiya Janata Party (BJP) and its National Democratic Alliance would win a general election that concluded Sunday.
“The markets should see continuity and potential for reforms and foreigners are likely to be net buyers” of stocks, said Jean-Charles Sambor, at BNP Paribas Asset Management. “We see India as being under-owned.”
The pound continued to struggle after the Labour opposition walked out of talks with Prime Minister Theresa May that were aimed at reaching a deal to leave the EU.
The news increases the chances Britain will crash out of the bloc on October 31, which most observers warn would hammer the economy.
May will next week try to push through parliament an agreement reached with her EU colleagues, but there is little hope for success after seeing it rejected three times already.
There are fears the premier will step down after another failure, which could open the way for a hardline Brexiter to take over and push for a no-deal exit.
Still, OANDA senior market analyst Jeffrey Halley looked on the bright side.
“With so much lost hope factored into the pound in the short-term — and given Australia has just proved political miracles can happen — a Theresa May rabbit from the hat could set the pound up for a mighty rebound,” he said in a note.
Both main oil contracts jumped more than one per cent — boosting energy firms — after Opec kingpin Saudi Arabia and key producer UAE said they would stick to output caps agreed with Russia.
The news came as tensions between the US and Iran increase, fuelling concerns about supplies from the Middle East.
In early trade London rose 0.1 per cent, Paris dipped 0.3 per cent and Frankfurt eased 0.2 per cent.
Key figures around 0810 GMT
Tokyo — Nikkei 225: UP 0.2 per cent at 21,301.73 (close)
Hong Kong — Hang Seng: DOWN 0.6 per cent at 27,787.61 (close)
Shanghai — Composite: DOWN 0.4 per cent at 2,870.60 (close)
London — FTSE 100: UP 0.1 per cent at 7,352.73
Pound/dollar: UP at US$1.2735 from US$1.2720 at 2040 GMT on Friday
Euro/dollar: UP at US$1.1159 from US$1.1156
Dollar/yen: UP at 110.19 yen from 110.02 yen
Oil — West Texas Intermediate: UP 87 cents at US$63.63 per barrel
Oil — Brent Crude: UP US$1.01 at US$73.22 per barrel
New York — Dow: DOWN 0.4 per cent at 25,764.00 (close) — AFP
