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Asian markets surge as Trump tweet lifts trade hopes

Nov 02 2018 07:08

Hong Kong and Shanghai led another rally across Asian markets on Friday after Donald Trump's tweet hailing positive talks with Chinese President Xi Jinping was seized on by dealers hoping for a breakthrough in their trade row.

The gains follow a third straight advance on Wall Street as a sense of optimism returns after a diabolical October, with riskier, higher-yielding currencies enjoying a bounce against the dollar, and the pound holding most gains.

Dealers were set for a strong end to a healthy week after Trump's tweet, which was a rare sign of hope in the months-long stand-off between the world's top two economies that many fear could batter global growth.

"Just had a long and very good conversation with President Xi Jinping of China. We talked about many subjects, with a heavy emphasis on Trade," he wrote.

He added that trade talks were "moving along nicely" and meetings were "being scheduled" at the G20 summit in Buenos Aires at the end of the month.

The comment comes days after he warned he would impose tariffs on all China's shipments to the US before saying he thought he could "make a great deal with China" but it was not yet ready.

Hong Kong surged more than 2%t and Shanghai jumped more than 1%.

The markets were already buoyant after Beijing said it would introduce measures to kickstart the stuttering economy following a string of weak data, including growth at its slowest pace in nine years during the third quarter.

The yuan also staged a recovery, jumping almost 1% to 6.9151 per dollar on Friday, having been wallowing around 10-year lows and close to the 7 level.

Tokyo ended the morning 1.2% higher, Singapore jumped 1%, Seoul piled on 2.2% and Taipei was 0.5% up. There were also healthy gains in Wellington and Jakarta but Sydney dipped 0.3%.

'Still cautious'

"Positive comments from President Trump over US-China trade tension are cheering the market in the short term," said Tai Hui, chief market strategist for Asia Pacific at JP Morgan Asset Management.

"Dollar moderation, the stabilising trade relationship between US and China and more stimulus from Beijing will be the key ingredients to revive market confidence in Asia.

"While we are still cautious over a full resolution of recent tensions in the medium term, resumption of dialogue between Washington and Beijing would be good enough to investors for now."

Oil prices extended Thursday's plunge of more than 2% on oversupply worries, with Iranian sanctions due within days but other major producers ready to pick up the slack.

The commodity has lost around 15% from four-year highs at the start of last month as Russia and OPEC said they would bolster output.

"OPEC and other major producers appear to have gotten the message from US President Donald Trump and increased production, but there are still questions on how much will the sanctions actually impact Iranian exports," said National Australia Bank senior forex strategist Rodrigo Catril.

"Iran's biggest customers have bowed down to US pressure and might still work out exemptions or try to exploit loopholes to keep purchasing crude from its longtime supplier."

On currency markets high-yielding units were well bought. The Australian dollar climbed 1%, South Korea's won strengthened 0.6% and the South African rand was 0.8% higher.

The pound dipped but held most of its gains after a report that British Prime Minister Theresa May had reached a post-Brexit deal with Brussels securing access to the EU for Britain's key finance sector.

Sterling jumped almost 2% on the report despite London and Brussels officials' reservations.

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