Asian shares hover near four-month high, buoyed by trade optimism

February 19, 2019

By Hideyuki Sano

TOKYO (Reuters) – Asian shares hovered near a four-month peak on Tuesday, supported by hopes that Sino-U.S. trade talks were making positive progress and expectations of policy stimulus from central banks.

While investors were without any firm directional cues with U.S. markets shut on Monday for public holiday, sentiment remains broadly buoyant with the STOXX 600 index of European shares hitting four-month highs.

MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed in early trade, staying near Wednesday’s four-month peak while Japan’s Nikkei was almost flat.

Reports of progress in trade talks between the United States and China have prompted investors to be mildly optimistic that the two countries could reach a compromise to avoid tariff hikes on March 1, although few details from the talks have emerged.

U.S. President Donald Trump said last week he might extend his March 1 deadline, which would stop an immediate increase in tariffs on $200 billion worth of Chinese imports to 25 percent from 10 percent.

Reflecting changing sentiment, Chinese shares have risen rapidly so far this month, with MSCI’s China A shares index up 6.5 percent, by far the best performance among major markets.

Additionally, investors are now seen returning to riskier asset markets after the U.S. Federal Reserve signaled earlier this year it could halt rate hikes in light of U.S. economic softness.

“Starting with the Fed, the world’s central banks are no longer leaning towards tightening. The Fed’s turnaround stemmed the dollar’s strength, allowing central banks in emerging markets to seek easy monetary policy too,” said Shuji Shirota, head of macroeconomic strategy at HSBC Securities.

“The global economy is not necessarily in strong shape now but we are in a ‘mini-goldilocks’ environment,” he said.

In currency markets, the euro and other risk-sensitive currencies remained underpinned by hopes on U.S.-China trade talks though most currencies were stuck in familiar ranges.

The euro changed hands at $1.1311, off Friday’s three-month low of $1.1234.

A run of soft European economic data, including Germany’s GDP figures, has weighed on the common currency.

Comments from European Central Bank’s Olli Rehn on Sunday have fanned speculation the European Central Bank would launch another round of Targeted Long-Term Refinancing Operations (TLTRO) to support bank lending.

The dollar stood at 110.59 yen, stepping back from Thursday’s seven-week peak of 111.13.

Sterling traded at $1.2919, with an eye on Brexit talks between Britain and the European Union.

The precious metals market was slightly more lively, with palladium surging to a record high of $1,458.5 per ounce as stricter emissions standards are seen increasing demand for the autocatalyst metal.

Gold rose to a near 10-month high of $1,327.40 per ounce.

Oil prices held firm at three-month highs owing to a growing belief among investors that OPEC’s supply cuts will prevent a build-up in unused fuel.

Brent futures rose to as high as $66.83 on Monday, hitting their highest levels since mid-November.

U.S. crude futures rose 0.5 percent in early Tuesday trade to $55.86.

(Editing by Sam Holmes)

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