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Asian investors on Monday cheered a
partial trade deal between China and the United States, sending regional
markets rallying, though observers were sceptical about the overall
significance of the agreement.
Dealers took their lead from a strong performance on Wall Street after
top-level negotiators ended two days of talks saying US tariffs due to take
effect this week would be put off and China would ramp up its purchases of US
farm products.
They also agreed on other issues including intellectual property,
financial services and currencies.
The news provided some much-needed support to Asian markets, with Shanghai
and Hong Kong both jumping more than one percent.
Sydney gained 0.7 percent and Singapore put on 0.4 percent, while
Wellington, Taipei and Seoul also rallied more than one percent.
Manila and Jakarta saw healthy advances.
However, while the deal was welcomed by Trump as “the greatest and biggest
deal ever made for our Great Patriot Farmers in the history of our Country”,
analysts were a little more guarded.
“Let’s not get carried away,” Raoul Leering, head of international trade
research at ING Bank NV, told Bloomberg News. “There is a very tough journey
ahead for the US and Chinese negotiators to cut a deal that really has
substance.”
– ‘Low-hanging fruits’ –
And Tai Hui, chief market strategist for Asia at JP Morgan Asset
Management, warned that “market optimism may not be well supported by
economic reality”.
He added: “While we are still waiting on the details on concessions made
by both sides, it seems these are still the low-hanging fruits that Beijing
has offered in the past.
“Some of the more challenging issues, such as the US blacklisting of
Chinese tech companies and possible limits on US institutional investors
investing in Chinese equities, don’t seem to be on the agenda.”
On currency markets, the dollar dipped against most higher-yielding,
riskier units owing to improved optimism.
The pound, however, was suffering selling pressure after European leaders
appeared unmoved by a hailed Brexit breakthrough on the Northern Irish
question between the leaders of Britain and Ireland.
Sterling rallied last week after British Prime Minister Boris Johnson and
counterpart Leo Varadkar said after talks they could see a route towards
striking a possible divorce deal.
But European officials said Sunday there were still obstacles on how to
manage trade and customs between EU member Ireland and Northern Ireland,
which is part of Britain.
“Eurozone negotiators and country leaders appear to be underwhelmed by the
elaborate detail of the proposed Irish backstop solution,” said Jeffrey
Halley, senior market analyst for Asia-Pacific at OANDA.
“Like the apparent trade deal that isn’t… precisely no details of the
nuts and bolts of Messrs Johnson and Varadkar’s breakthrough conversation of
last week have been released.”
Oil prices turned lower after Friday’s more-than-two-percent surge fuelled
by a blast on an Iranian tanker as well as news of the mini trade deal.
– Key figures around 0230 GMT –
Hong Kong – Hang Seng: UP 1.2 percent at 26,632.24
Shanghai – Composite: UP 1.7 percent at 3,023.95
Tokyo – Nikkei 225: Closed for a public holiday
Pound/dollar: DOWN at $1.2600 from $1.2645 at 2050 GMT on Friday
Euro/pound: UP at 87.55 pence from 87.26 pence
Euro/dollar: DOWN at $1.1030 from $1.1035
Dollar/yen: DOWN at 108.25 yen from 108.39 yen
West Texas Intermediate: DOWN 24 cents at $54.46 per barrel
Brent North Sea crude: DOWN 25 cents at $60.26 per barrel
New York – Dow: UP 1.2 percent at 26,816.59 (close)
London – FTSE 100: UP 0.8 percent at 7,247.08 (close)
(BSS)
