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Asia: Markets extend gains on cautious trade optimism

[HONG KONG] Asian markets mostly rose on Tuesday with investors cautiously optimistic that China and the US can reach a deal ending their trade war as the two sides prepare to resume talks this week.

With New York closed for a public holiday there were few catalysts to drive buying, though the release of Federal Reserve minutes on Wednesday will be pored over for an idea of the bank's interest rate plans.

Top-level officials from the world's two biggest economies will reconvene in Washington after a series of negotiations in Beijing last week, with the US side telling Donald Trump they had been "very productive".

The positive tone from the diplomats, and the president's indication he could extend a deadline for agreement, boosted regional markets Monday, extending a 2019 rally fuelled by optimism of an end to the nearly year-long tariffs spat.

Shanghai added 0.3 per cent, having piled on more than two percent Monday, while Hong Kong rose 0.2 per cent and Tokyo finished the morning 0.1 per cent higher.

Sydney gained 0.5 per cent, Singapore put on 0.3 per cent and Taipei 0.2 per cent, with Seoul flat and Wellington marginally lower.


However, Oanda senior market analyst Jeffrey Halley warned of trouble ahead if Chinese and US officials do not agree a deal.

"The rallies (Monday) were impressive given the talks ended last week without any concrete results and have yet to even recommence in Washington this week due to the US public holiday," he said.

"Without sounding like a damp squib, there is now a vast amount of 'optimism' baked into currency, stock and energy market prices globally and precisely zero concrete detail. The unwind, should no deal be struck, could be very ugly."

Oil prices were mixed after rallying on Monday on trade talks hope and signs that OPEC and other key producers are narrowing output.

"Saudi Arabia seems willing to do whatever is necessary to reach levels of US$80 a barrel, and judging by the price reaction, they're on track," said Eugen Weinberg, head of commodities research at Commerzbank AG.

"Even rather bearish factors, like a stronger-than-expected rise in US oil production, does not seem to derail the price recovery."

On currency markets the pound was down, with uncertainty fanned by news that seven pro-remain MPs had split from Britain's opposition Labour Party over its handling of Brexit and a row over antisemitism.

The move "looks awfully like a bungled mess of the creation of a new party, which we think is more likely to be pound-negative... by giving Brexit a less effective opposition", said Peter Chatwell, head of European rates strategy at Mizuho International, told Bloomberg News.