Asian markets rallied Monday following a strong lead from Wall Street and comments from Donald Trump’s top economic adviser hailing “positive” trade talks with top Chinese negotiators.
Optimism that central banks will provide fresh support to head off a global economic recession has also lent much-needed support to regional equities after last week’s sell-off, with eyes on an upcoming speech by Federal Reserve boss Jerome Powell for clues about its plans.
Investors were in an upbeat mood after White House chief economic adviser Larry Kudlow said that if talks between deputies from Beijing and Washington went well and “we can have a substantive renewal of negotiations” then “we are planning to have China come to the USA and meet with our principals to continue the negotiations”.
He added that high-level phone talks last week were “a lot more positive than has been reported”.
Trump provided further cause for hope by tweeting: “We are doing very well with China, and talking!”
Kudlow also raised the prospect of using cash taken from higher tariffs on Chinese goods to pay for tax cuts.
– White House recycling –
“This sort of recycling won’t clear the oceans of plastic or reduce global warming, but it is an elegant solution to reducing the pain of tariffs on the American consumer of China and may give equity markets a small boost as we start the week,” said Jeffrey Halley, senior market analyst for Asia-Pacific at OANDA.
The remarks helped Asian traders build on New York’s rally.
Hong Kong led gainers, surging 1.8 percent with dealers also cheered by three days of protests in the city not descending into violence.
Shanghai rose 0.6 percent and Tokyo added 0.5 percent by the break.
Sydney climbed 0.8 percent, Singapore put on 0.3 percent and Seoul jumped 0.5 percent with Wellington, Taipei and Jakarta in positive territory.
There remains a high level of concern about the global outlook and particularly the US economy after yields on 10-year US Treasury bonds slid last week below that of the two-year note, while the 30-year yield fell below two percent for the first time ever.
The so-called “inversion” — when short-term interest rates are higher than longer-term ones — is viewed as a harbinger of recession.
But investors are hopeful that authorities will unveil stimulus to limit any impact. Germany’s Der Spiegel said Angela Merkel’s government was ready to boost public spending, while China announced an interest rate reform that it said would lower borrowing costs for companies.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 0.5 percent at 20,525.45 (break)
Hong Kong – Hang Seng: UP 1.8 percent at 26,199.49
Shanghai – Composite: UP 0.6 percent at 2,839.97
Euro/dollar: UP at $1.1092 from $1.1089 at 2100 GMT Friday
Pound/dollar: DOWN at $1.2148 from $1.2149
Euro/pound: UP at 91.33 pence from 91.25 pence
Dollar/yen: UP at 106.41 yen from 106.36 yen
West Texas Intermediate: UP 46 cents at $55.33 per barrel
Brent North Sea crude: UP 55 cents at $59.19 per barrel
New York – Dow: UP 1.2 percent to 25,886.01 (close)
London – FTSE 100: UP 0.7 percent at 7,117.15 (close)