Asia: Markets tempered by US-China doubts

[HONG KONG] Asian markets were tempered on Thursday after two days of gains as doubts emerged over next week's US-China trade meeting.

Reports that Donald Trump's Trade Representative Robert Lighthizer will lead a delegation to China next week to resume trade talks buoyed markets on Wednesday.

The meeting would be the first head-to-head since negotiations were cut short in May by Mr Trump's surprise decision to hit China with more tariffs for what he called Beijing's backsliding.

But the release of a Chinese defence white paper that accuses Washington of undermining "global strategic stability" has softened hopes of a resolution to the long-running trade battle.

Traders had "growing doubts that anything meaningful will come out of next week's face to face between US and Chinese trade delegates as non-trade-related tensions start to flare", said Stephen Innes of Vanguard Markets.

Investors were also wary of a slump in manufacturing activity, amid signs of Eurozone business growth stalling.

Mr Innes said that weakness in US manufacturing would likely spill over into the services sector.

"When this happens in September or October, it will trigger one of the most significant US dollar and US asset sell signals of the year," he added.

CENTRAL BANK REPRIEVE

A lacklustre start to Wednesday trade on Wall Street finished with a surge on the S&P 500 and Nasdaq indexes despite the announcement of a regulatory crackdown on tech giants, thanks to increasingly dovish statements by central banks.

Analysts expect the European Central Bank to point to a rate cut in September, while markets are pricing in a reprieve from the Federal Reserve when it meets next week.

"Equity markets continue a record run on the back of lower rates, and even the mighty Fed which hiked four times in 2018 is now ready to admit defeat and walk back its monetary policy with a rate cut in July," said Oanda senior market analyst Alfonso Esparza.

Hong Kong and Tokyo were both up 0.3 per cent in early trade, while Shanghai was 0.2 per cent higher.

Sydney was up 0.4 per cent after Australian Prime Minister Scott Morrison vowed Canberra would be "one of the first cabs off the rank" in working towards a trade deal with Britain following its departure from the European Union.

Singapore was up 0.2 per cent in morning trade while Seoul and Taiwan were all down.

On currency markets, the pound pared back its rise after Boris Johnson took over as prime minister on Wednesday.

AFP