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Asian shares at 1-wk top on conciliatory trade tone, stimulus hopes

Published 2019-08-29, 11:36 p/m
© Reuters.  Asian shares at 1-wk top on conciliatory trade tone, stimulus hopes
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* Asian stock markets : https://tmsnrt.rs/2zpUAr4

* MSCI ex-Japan up 1%, E-minis rise 0.2%

* U.S., China to have face-to-face trade talk in Sept

* Analysts remained cautious about prospect of trade deal

* Currencies muted; gold, silver off recent highs

By Swati Pandey

SYDNEY, Aug 30 (Reuters) - Asian shares jumped to a one-week high on Friday as the United States and China returned to the negotiating table to resolve their tariff dispute and on hopes central banks and governments will do more to avert a global growth slowdown.

Investors were focused on a string of economic releases due over the weekend including China's official manufacturing survey, which would provide a good gauge of the real impact from the Sino-U.S. trade war.

All Asian stock markets were in black on Friday, sending MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS up 1% to the highest since Aug. 23 and on track for a small weekly gain.

E-Minis for the S&P500 ESc1 added 0.2% after more than 1% gain on Wall Street overnight and futures for Eurostoxx50 STXEc1 rose 0.3%.

Japan's Nikkei .N225 jumped 1.2% while South Korea's KOSPI index .KS11 gained 1.7% and Australian shares .AXJO were 0.9% higher.

The mood lifted after U.S. President Donald Trump said some trade discussions were taking place with China on Thursday, with more talks scheduled. commerce ministry also said a September round of meetings was being discussed by the two sides, but added it was important for Washington to cancel a tariff increase.

The comments spurred hopes for progress in the talks and boosted the Chinese yuan, which snapped a 10-day losing streak CNY=CFXS . On Friday, it was weaker at 6.8530.

"The S&P futures spike is being blamed largely on the China trade headlines along with fiscal stimulus hopes and the prospect for a steeper U.S. curve," JPMorgan (NYSE:JPM) analysts told clients in a note.

"In reality, the headlines are extremely innocuous and don't differ from what China has said in the past but they crossed during a dead zone of liquidity and attendance and as a result are having an outsized influence on trading."

Also boosting sentiment, South Korea finalised the most aggressive budget spending plan since the 2008/09 global financial crisis for next year as Asia's fourth-largest economy is buffeted by growing threats both at home and from abroad. is considering lowering its corporate tax rate while the U.S. government is thinking about issuing 50- and 100-year bonds in a bid to steepen the yield curve.

Trade tensions have dominated market sentiment for much of this year with wild swings in world stocks as rhetoric between the United States and China fluctuates from conciliatory to combative.

Worryingly, recent economic data has also pointed to a global growth slowdown with business investment, manufacturing activity and exports all going south across major economies.

"The recent escalation of the tariff war provides no hopes of a near-term trade deal," ING's Asia economist Prakash Sakpal wrote.

"As such, we are in for a long stretch of slow growth and increasingly challenging policy environment, as some central bankers have warned."

Even so, U.S. Treasury yields rose overnight with the benchmark 10-year Treasury US10YT=RR climbing to 1.535% from a three-year low of 1.443% touched earlier this week.

It was last at 1.5198% but still below two-year yields US2YT=RR at 1.5324%. Such an inversion was last seen in 2007 and correctly foretold the great recession that followed a year later.

Among currencies, the dollar .DXY was barely changed at 98.525 against a basket of six major currencies. It was a shade lower against the Japanese yen at 106.47 after gains overnight while the euro EUR= was 0.1% down at $1.10445.

Sterling GBP= held at $1.218 ahead of a crucial few days for parliament next week which could even result in a no-confidence motion and a new election.

In commodities, spot gold XAU= came off recent highs to trade at $1,524.4 an ounce. Silver was at $18.25 an ounce after hitting its highest level in more than two years. crude CLc1 slipped 1 cent to $56.61 a barrel while Brent was flat at $61.07 a barrel.

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