TOKYO, Dec 5 — Asian stocks edged up today on signs the United States and China were on track for a preliminary trade deal, though optimism was tempered by the almost daily shifts in prospects for defusing the damaging tariff war now in its second year.
The fluid situation around Sino-US trade negotiations has cast a pall on financial markets heading into Christmas, with major economies grappling under the weight of weak exports, investments and corporate profits.
Investors were quick to latch on to a Bloomberg report yesterday that Washington and Beijing are closer to agreeing how many tariffs would be rolled back in a “phase one” trade deal.
US President Donald Trump later said that negotiations with China are going “very well,” providing a boost to riskier assets and denting safe havens like the Japanese yen.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3 per cent. Australian shares were up 0.9 per cent, while Japan's Nikkei stock index rose 0.81 per cent.
Trump's comments marked a reversal from Tuesday when he roiled global markets by saying a trade deal may not come until after the 2020 US presidential election.
Analysts warn that more market turbulence is possible given Sino-US negotiations are very fluid.
“We could be in for a bit of a rally in risk assets and risk-on trades,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors in Sydney.
“My base case scenario is the two sides reach some deal. The pressure for a deal is immense simply because of the economic slowdown in both countries. However, we see increased volatility because policy uncertainty has become a constant.”
US stock futures fell 0.03 per cent today in Asia after the S&P 500 gained 0.63 per cent yesterday.
The United States has imposed tariffs on Chinese goods in a 17-month long dispute over trade practices that the US government says are unfair. China has responded in kind with its own tariffs on US goods.
If both sides cannot reach an agreement soon, the next important date to watch is December 15, when Washington is scheduled to impose even more tariffs on Chinese goods.
Traders are also bracing for the closely-watched US non-farm payrolls report due tomorrow to determine how well the US economy is holding up amid a global slowdown.
Some investors are betting that Trump will delay the additional duties as long as he gets close enough to a compromise because the tariff hike would hurt US consumers during the crucial year-end shopping season.
However, Trump has repeatedly sent mixed messages about the status of negotiations, sparking fits of optimism and despair in financial markets.
The yen traded at 108.81 per US dollar, ceding some of the previous day's gains as positive signs about the trade dispute hurt demand for safe-haven currencies.
The yield on benchmark 10-year Treasury notes fell slightly to 1.7723 per cent in Asia, retracing some of the gains it made in the previous session.
US crude edged 0.03 per cent lower to US$58.41 (RM243.85) a barrel today as a 3 per cent rally overnight showed signs of fading.
However, prices could be supported if the Organisation of the Petroleum Exporting Countries, and allies including Russia, approve deeper crude output cuts when they meet in Vienna today and tomorrow. — Reuters