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Asia: Dealers trade carefully before Trump-Xi, oil extends gains

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[HONG KONG] Asian markets were mixed on Friday with dealers moving cautiously at the end of a broadly upbeat week with focus turning to the much-anticipated meeting between Donald Trump and Xi Jinping.

Energy firms were among the best performers after a rally in oil prices, while high-yielding and emerging market currencies continued Thursday's advances against the dollar as the Federal Reserve shows signs it will slow down its pace of interest rate hikes.

While the outcome of Saturday's crunch talks between Mr Trump and Mr Xi hangs in the balance, there are hopes the heads of the world's top two economies can find a way to ease their trade row that has seen them exchange deep import tariffs.

Ahead of the leaders' arrival in Buenos Aires late Thursday for the G-20 meeting, there have been conflicting messages coming out of Washington about the chances of a breakthrough, with most observers saying they do not expect any major announcements.

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"I wouldn't be surprised at the end of this weekend if the US and China didn't announce a concord that basically set down a path to help resolve the trade frictions," Scott Minerd, chief investment officer at Guggenheim Partners, told Bloomberg TV.

"I don't think that out of the meeting there's going to come much substance, but there will be a sort of set of principles that will be established to start the process of bringing an end to the trade war."

OPEC MEETING UP NEXT 

On Asian equity markets Hong Kong added 0.6 per cent, while Shanghai gained 0.1 per cent, with dealers there poring over data showing Chinese manufacturing stalled in November as the effects of Trump's multi-billion-dollar tariffs begin to bite.

Singapore gained 0.3 per cent, while Wellington and Taipei each rose 0.4 per cent.

However, Tokyo reversed early gains to end the morning marginally lower, Sydney shed 1.3 per cent and Seoul was off 0.4 per cent.

Past the G-20 meeting, traders are looking to the following weekend's gathering of Opec and non-Opec oil producers, where Saudi Arabia and others are expected to cut output in a bid to support prices.

Crude edged up Friday, a day after enjoying a much-needed rally on a report that Russia will join in the reduction, providing a boost to regional energy firms.

"If a meaningful deal is reached between Opec and Russia to tackle glut problems, we can probably expect a meaningful rebound in energy prices," said Margaret Yan Yang, market analyst with CMC Markets Singapore.

However, others pointed out that no one knows how much and for how long the output cuts will be, while at the same time the US continues to ramp up production.

Stephen Innes, head of Asia-Pacific trade at Oanda, added: "With traders already anticipating a one million barrels per day cut, which is arguably priced in, it will probably take a much deeper cut to jolt the market into a short covering rally.

"Otherwise, the market falls prey to the prevailing bearish sentiment that will continue to drive prices lower on the premise the reduction might not be sufficient enough to draw down surplus supplies."

AFP