Uncertainty Dominates Asian Trading Session

Uncertainty Dominates Asian Trading Session

Asian traders were biding their time in early trade on Thursday as a healthy lead from Wall Street was tempered by geopolitical concerns and caution ahead of high-level China-US trade talks.

All three main US indexes finished in the green zone thanks to another positive round of economic indicators and corporate results.

However, traders remain on edge with expectations that inflation will pick up pace pushing key 10-year Treasury yields to seven-year highs and making it more likely the cost of borrowing will also go up.

In Hong Kong the Hang Seng Index slipped 0.1 percent, Shanghai eased 0.2 percent and Sydney was 0.4 percent down while Seoul was also off 0.1 percent.

Taipei and Manila were also down.

However, Tokyo ended the morning up 0.4 percent, with exporters boosted by a generally weaker yen. Singapore added 0.2 percent and Wellington was also higher.

Thursday sees the resumption of talks between the US and China on resolving a tariff spat that has seen each side threaten duties on billions of dollars of goods and which some fear could spark a damaging trade war.

China’s Vice Premier Liu He, Xi Jinping’s pointman on economics, is leading a delegation in Washington to meet Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross and US Trade Representative Robert Lighthizer. However, it has emerged that China critic and top White House trade adviser Peter Navarro will not attend.

There are hopes they can find a breakthrough after a recent gathering in Beijing ended without agreement.

– Pound bounces –

Developments on the Korean peninsula are also in focus after the North’s leader Kim Jong Un warned he would pull out of a historic summit with Donald Trump because of Washington’s demands over its nuclear programme.

When asked Wednesday about whether the talks would still go ahead, Trump said “we’ll see”, adding he had not been informed of any change of plan yet.

On currency markets the dollar has benefited from bets on higher US rates, keeping it around multi-month highs against its major peers, with retail data this week having provided further support.

“The consumer remains the economy’s backbone, and if this robust trend in the retail space continues to build, factor in a bit of wage growth pressure and the US dollar will continue to move higher on the back of higher yields,” said Stephen Innes, head of Asia-Pacific trade at OANDA.

While it edged down slightly Thursday the greenback is holding at 2018 highs against the euro as horse-trading to form an Italian government fuels uncertainty in one of the eurozone’s biggest economies. A string of disappointing data on the economic bloc is also bearing down on the single currency.

And the pound enjoyed a rally on a report in Britain’s Daily Telegraph that said Britain would tell the EU it was prepared to remain in the customs union after Brexit.

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Shayne Heffernan Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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