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Asia: Markets rise but investors guarded over trade

[HONG KONG] Asian markets enjoyed broad gains for a third day on Wednesday but investors moved more cautiously as they took stock of the latest trade developments and looked to possible headwinds.

New York provided another record lead on lingering optimism after the United States and Mexico agreed on a revised free-trade deal and Canada began talks that could see them join.

However, while the news was seen as a much-needed boost after Donald Trump threatened to tear up the North American Free Trade Agreement when he took office, there remain concerns about his ongoing tariffs row with China that has rattled markets for months.

Washington could soon also impose levies on US$200 billion of Chinese goods, which would come on top of the US$50 billion already being hit.

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"Latest news headlines seem to be easing market worries over a trade war for now," Kengo Suzuki and other forex strategists at Mizuho Securities said in a note.

"But it may be a bit too early to become fully optimistic, given fears that the Trump administration may impose additional tariffs on US$200 billion worth of Chinese goods as early as next month and US-China summit talks are expected after the US mid-term elections in November," they said.

Still, for now traders are upbeat. Tokyo went into the break 0.7 per cent higher and Hong Kong added 0.3 per cent.

Sydney rose 0.3 per cent while Singapore and Seoul each edged up 0.1 per cent. Wellington and Taipei also rose but Shanghai lost 0.4 per cent.

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"Overall the US-Mexico deal has deflected attention away from Trump's legal setbacks as investors may see the light at the end of the tunnel - hoping that the US-Sino trade dispute can end in an equally friendly manner," Stephen Innes, who heads Asia-Pacific trade at Oanda, said in a note.

On currency markets the Mexican peso gave up all the gains made on the back of the trade deal news and was down 1.7 per cent Wednesday as observers questioned the agreement.

Its "underperformance can be attributed to numerous reports suggesting the preliminary trade agreement... is far from complete and it still needs US Congress approval", said Rodrigo Catril, senior foreign exchange strategist at National Australia Bank.

"In a nutshell it seems that many contentious issues remain unresolved and there is a very tight timeline that needs to followed if a Nafta deal is to be ratified by the current US Congress."

The pound was also struggling to recover after British Prime Minister Theresa May seemed to hint she was open to a possible no-deal Brexit, saying leaving the EU without an agreement would not be a disaster.

AFP