The Business Times

Asia: Markets swing on tempered trade hopes, weak data

Published Thu, Feb 28, 2019 · 03:19 AM
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[HONG KONG] Asian markets fluctuated Thursday as optimism over China-US trade talks was tempered by Donald Trump's top negotiator, while investors also digested weak factory data from Beijing and fresh geopolitical tensions in Kashmir.

The global rally that has characterised most of this year took a knock after US Trade Representative Robert Lighthizer told lawmakers that "real progress" had been made with China, but a lot of work was still needed before a pact is signed.

While his comments did not derail expectations of an agreement at some point - with both sides reporting good progress and Mr Trump delaying a deadline for a deal - it did give traders pause for thought, observers said.

Mr Lighthizer said a "trade deal hasn't been agreed yet, bringing some reality back to euphoric markets post-Trump's tariff extension, despite the fact Lighthizer also announced both sides had agreed on an enforcement process", said Oanda senior market analyst Jeffrey Halley.

After a negative lead from Wall Street, Asian markets swung on Thursday and Tokyo went into the break 0.4 per cent lower.

Hong Kong was up 0.4 per cent mid-morning, Shanghai gained 0.3 per cent, Sydney put on 0.2 per cent and Wellington was up 0. 4 per cent.

But Singapore slipped 0.5 per cent and Seoul shed 0.2 per cent, while Jakarta retreated 0.5 per cent and Manila lost 0.7 per cent.

Also fuelling selling pressure was figures showing Chinese manufacturing activity contracted for a third straight month in February, with factories hit by the long Lunar New Year break, concerns about slowing growth and uncertainty from the trade row.


However, Zhou Hao, a senior emerging markets economist at Commerzbank AG, said the results were likely not as bad as they seemed and the outlook could be positive.

"I think we still want to wait for the next month's reading as this month's is distorted by the holiday," he said.

"Also the economy could stabilise this month. Rising input prices suggest that there is no need to worry about deflation, so the question now rests on whether the economy has enough impetus."

Nervousness continues to stalk trading floors after Pakistan and India said they had shot down each other's fighter jets on Wednesday, fuelling worries of a conflict between the nuclear-armed neighbours.

The developments followed the February 14 suicide bombing by militants in the disputed Kashmir region that that killed 40 Indian troops.

Pakistan prime minister Imran Khan called for "better sense" to prevail.

"With politicians on both nuclear-armed sides making soothing comments overnight, the trick will be finding a mutually face-saving path to de-escalate the situation. Of course, this will be much easier said than done, and the potential for hostilities to ratchet higher remains very high," Mr Halley added.

On currency markets the pound held gains after touching a near eight-month high earlier on Thursday after MPs gave Prime Minister Theresa May more time to work on her EU withdrawal deal after she promised they could delay Brexit if necessary.

Sterling was also given a boost after the opposition Labour Party said it would back a second referendum, having lost a vote on its own Brexit plan Wednesday.


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