Asian markets extended gains Tuesday as concerns about the China-US trade pact eased, while investors remain optimistic US lawmakers will eventually hammer out a new stimulus for the crippled economy despite talks struggling.
There was also some relief that China did not include any members of Donald Trump’s administration in a group of 11 Americans hit with sanctions in retaliation to a similar US move last week linked to the Hong Kong row.
And while Europe battles a worrying pick-up in cases after weeks of lockdown easing, there are signs the virus is slowing in major states including New York and Texas, and World Health Organization boss Tedros Adhanom Ghebreyesus said it was “never too late to turn the outbreak around”.
With the virus playing in the background, continuing to hustle economies around the world, the China-US stand-off has been a major headache, with the two butting heads on several issues that have fanned worries they could renew their damaging trade war.
However, there is some confidence they will stick to their commitments after talks at the weekend to review their January tariffs pact.
Observers have pointed out that Beijing has failed to buy certain products owing to restrictions caused by the coronavirus, but the head of the central People’s Bank of China told state media the country would abide by the agreement despite tensions.
“No matter how the international situation changes, the most important thing is to get our own things done and to firmly deepen financial reform and opening-up,” Yi Gang told the Xinhua news agency.
Meanwhile, Bloomberg News reported that China would increase buying of soybeans from the US and ditch expensive Brazilian purchases.
“The strong sense is that the Trump administration won’t want to jeopardise the deal this side of the election for fear of alienating the important midwest farming constituency,” said Ray Attrill at National Australia Bank.
– Lai’s Next Digital rockets again –
Hong Kong led the gains, jumping more than two percent, with Macau casinos rallying on news that China would resume issuing tourist visas to Macau, reopening a crucial revenue stream for resorts that have been battered by a crash in tourist numbers.
Tokyo rose 1.7 percent as investors returned from a long weekend to play catch-up with Monday’s advances, while Sydney was up more than one percent, as was Seoul.
Singapore added 0.2 percent, brushing off data showing the city’s economy contracted more than first thought in the second quarter. Wellington, Jakarta, Manila and Shanghai were also positive.
In Hong Kong, Next Digital, the media company owned by Jimmy Lai, surged 180 percent a day after rocketing 183 percent thanks to pro-democracy activists buying it following the anti-China tycoon’s arrest under a new security law.
US lawmakers remain deadlocked in their pursuit of a new stimulus, though observers say that with a general election around the corner, Democrats and Republicans will likely reach a deal.
Trump’s executive orders at the weekend deferring payroll taxes, providing $400 in weekly unemployment benefits and making it harder to evict people eased immediate concerns, though markets say a full deal is key.
The US Chamber of Commerce said orders were “no substitute for Congressional action”.
A Democrat decision to lower its proposal to $2 trillion from a previous $3.5 trillion indicated the two sides were going in the right direction, though it is still twice the size of the Republican offer.
“The pressure is on the Democrats to offer a meaningful concession and likely a deal will emerge in the $1.5-2.0 trillion area,” said OANDA’s Edward Moya.