Focus back on US-China trade talks – Asian markets rise

“A large percentage of the market thinks China may roll the dice and take advantage of what they think is Trump’s weakened political state.”

Asian markets rise today as investors resume their focus on the next round of China-US trade talks this week. But hopes for success are being tempered by mixed messages from both sides of the table. There has been a general feeling of positivity in recent weeks that a solution to the long-running tariffs saga can be found, providing some much-needed support to equities in the face of worsening economic data.

Beijing’s top trade envoy Liu He will meet with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin from Thursday this week.

But observers warn it is unlikely progress will be smooth, with reports this week saying China had cut back on the number of areas it is willing to discuss, suggesting leaders sense weakness in the White House as Donald Trump faces impeachment proceedings and a slowing economy.

Trump said late Monday he preferred to strike a big deal. “We’ve come this far. We’re doing well. I would much prefer a big deal and I think that’s what we’re shooting for.”

And on Monday, the US said it was blacklisting 28 Chinese entities it accuses of being implicated in rights violations and abuses targeting Uighurs and other mostly Muslim minorities in the Xinjiang region. The move bars them from buying US products.

The meeting comes just over a week before a new round of punitive tariffs is due to be imposed on China.

Stephen Innes, Asia-Pacific market strategist at AxiTrader says China is gaining confidence in the lead up to the negotiations.

“A large percentage of the market thinks China may roll the dice and take advantage of what they think is Trump’s weakened political state, trying to push negotiations closer to next November’s presidential election”.

“In this context… Trump may decide to hardball the upcoming talks, suggesting there could be a high level of disappointment even relative to the market’s muted expectations.”

Still, regional markets were enjoying some much-needed buying support today as the Chinese delegation heads to Washington. Hong Kong climbed 0.7% as dealers returned from a long weekend break to mixed US jobs data that eased concerns about a US recession while also keeping expectations for an interest rate intact. Shanghai rose 0.6% following the week-long National Day celebrations, while Tokyo went into the break 1% higher.

Sydney and Singapore were each 0.5% higher, Seoul rose 0.9%, Manila jumped more than 1%, and Taipei and Jakarta both put on 0.6%. Wellington was slightly lower.

Also on the agenda for investors is the release this week of minutes from last month’s US Federal Reserve policy meeting, which will provide an idea about the bank’s thinking leading up to its rate cut, while third-quarter earnings season also gets underway.

Key figures this morning…

Tokyo – Nikkei 225: UP 1.0% at 21,596.47 (break)

Hong Kong – Hang Seng: UP 0.7% at 26,010.07

Shanghai – Composite: UP 0.6% at 2,923.26

Euro/dollar: UP at $1.0976 from $1.0970 at 2040 GMT

Pound/dollar: DOWN at $1.2292 from $1.2297

Dollar/yen: UP at 107.34 yen from 107.29 yen

West Texas Intermediate: UP 34 cents at $53.09 per barrel

Brent North Sea crude: UP 40 cents at $58.75 per barrel

New York – Dow: DOWN 0.4% at 26,478.02 (close)

London – FTSE 100: UP 0.6% at 7,197.88 (close)

SOURCE: Agence France-Presse