Quarterly Business Magazine

Asia Stocks Rise as Trade Talks, Stimulus Mulled: Markets Wrap

Posted :
Tuesday, August 20, 2019

Most Asian stocks posted modest gains Tuesday as investors digested signs of progress on trade negotiations and speculation of government stimulus to shore up economic growth. Treasuries rose and the dollar traded near the year’s high.

Shares pushed higher in Tokyo, Sydney and Seoul, and fluctuated in Hong Kong and Shanghai. S&P 500 Index futures edged higher with the benchmark gaining for a third day as U.S. Commerce Secretary Wilbur Ross said the nation will delay restrictions imposed on some business operations of China’s Huawei Technologies Co. The yen steadied after falling back overnight.

Treasury yields gave up some earlier gains as the White House denied that the administration was considering payroll tax cuts as a way to bolster consumer spending, which was earlier reported by the Washington Post. Earlier, Federal Reserve Bank of Boston President Eric Rosengren pushed back against further rate cuts, arguing he’s not convinced that slowing trade and global growth will significantly dent the economy. U.S. President Donald Trump called for the central bank to cut rates by “at least 100 basis points.”

The latest headlines on trade and potential fiscal stimulus may provide some reprieve for investors spooked by tumbling bond yields. The delay on Huawei was seen as encouraging for the long-awaited trade pact between the world’s two largest economies. Still, the company said the temporary relief doesn’t change the fact that it’s been treated “unjustly.”

Meanwhile, Trump’s top economic adviser, Larry Kudlow, will speak with business leaders this week amid concerns about the rising odds for a recession, the trade war and whipsawing markets. That comes before Fed Chairman Jerome Powell’s remarks about the challenges for monetary policy at the Jackson Hole symposium Friday.

“Our thesis maintains that over the next six months equity markets should do better, really mainly underpinned by the lower interest rates around the world,” Jun Bei Liu, a portfolio manager at Tribeca Investment Partners in Sydney, told Bloomberg TV. “Of course, there’s a few issues that arise. One is that the valuations seem incredibly high. And the trade conflict is another uncertainty at this point.”

Elsewhere, there was muted reaction after China made borrowing costs cheaper for companies with the introduction of a revamped market benchmark rate. Bunds tumbled as Germany was said to be preparing a stimulus plan that could be triggered by a deep recession. Oil was little changed.

Here are some notable events coming up:

  • Minutes of the Fed’s July meeting will provide details on the discussions leading to the first interest-rate cut in a decade when they are released on Wednesday.
  • Thursday brings the Bank Indonesia rate decision and press conference with Governor Perry Warjiyo.
  • Flash PMIs are due for the euro area on Thursday.
  • Kansas City Federal Reserve Bank hosts its annual central banking symposium in Jackson Hole, Wyoming, starting Thursday. Fed Chairman Jerome Powell will give remarks on Friday.

Here are the main moves in markets:

Stocks

  • The MSCI Asia Pacific Index rose 0.4% as of 1:30 p.m. in Tokyo.
  • Topix index rose 0.6%.
  • Australia’s S&P/ASX 200 Index rose 1%.
  • South Korea’s Kospi index gained 0.9%.
  • Hang Seng Index was little changed.
  • Shanghai Composite Index rose 0.1%.
  • S&P 500 futures rose 0.1%. The S&P 500 rose 1.2%.

Currencies

  • The Japanese yen traded up 0.1% to 106.56 per dollar after dipping 0.3%.
  • The offshore yuan was stable at 7.0746 per dollar.
  • The Bloomberg Dollar Spot Index edged lower after gaining 0.3%.
  • The euro traded at $1.1088, up 0.1%.

Bonds

  • The yield on 10-year Treasuries fell about two basis points to 1.59%.
  • Australia’s 10-year bond yield rose three basis points to 0.94%.

Commodities

  • West Texas Intermediate crude was little changed at $56.19 a barrel. It jumped 2.4% earlier.
  • Gold’s spot price was flat at $1,495.16 after sliding 1.2%
  • By Andreea Papuc and Sybilla Gross
  • (Bloomberg)
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