Asia puts brave face on Trump threat, oil subdued
SYDNEY: Asian share markets fought to keep a global rebound alive yesterday after US President Donald Trump seemed to quash hopes of a trade truce with China, clouding what had been a bright start to the week.
Moves were generally muted but Japan's Nikkei managed to add 0.8 per cent and Chinese blue-chips rose 0.4 per cent.
MSCI's broadest index of AsiaPacific shares outside Japan dithered either side of flat and was last up 0.2 per cent.
E-Mini futures for the S&P 500 dipped 0.1 per cent and spreadbetters pointed to a subdued start for the major European Bourses.
In an interview with the Wall Street Journal, Trump said he expects to move ahead with raising tariffs on US$200 billion in Chinese imports to 25 per cent from 10 per cent currently.
Trump said it was ‘highly unlikely' he would accept China's request to hold off on the increase, planned for Jan 1.
The comments ran counter to recent speculation about a possible deal when Trump meets Chinese President Xi Jinping at the G20 summit in Buenos Aires later this week.
“Trump's pessimistic view on the chances of a game-changing China trade deal may puncture global equity markets' optimistic start to the week,” said Sean Callow, a senior FX analyst at Westpac in Sydney.
“Combined with last week's harsh report from the US trade representative, investors have only the flimsiest hope that the Trump-Xi meeting in Argentina will amount to more than a hill of soybeans.”
That put trade-sensitive currencies, including the Australian dollar, on the defensive, while the dollar lost some ground on the safe haven yen to 113.46.
The euro edged up a shade to US$1.1334 and the dollar dipped to 97.027 against a basket of currencies.
Shares in Apple Inc fell afterhours in reaction to Trump's comments that tariffs could also be placed on laptops and iPhones imported from China.
Trump's remarks came just as the mood among investors had shown signs of brightening and Wall Street took heart from an upbeat holiday shopping period.
The Dow had ended Monday up 1.46 per cent, while the S&P 500 gained 1.55 per cent and the Nasdaq 2.06 per cent.
The rally came after the S&P 500 on Friday recorded its lowest close in six months, down more than 10 per cent from September's peaks and back in ‘correction' territory.
In commodity markets, oil prices laboured with record production by Saudi Arabia.
Oil had climbed nearly 3 per cent on Monday but that was seen as largely a technical correction after weeks of heavy losses, driven both by oversupply and demand worries.
US crude was off 9 cents at US$51.54 a barrel, while Brent futures inched up 3 cents to US$60.51.
Analysts at National Australia Bank noted the 30 per cent drop in oil since early October would drag on US inflation in coming months, perhaps offering further reason for the Federal Reserve to go slower on tightening.
“This is a starkly different picture to just a few months ago,” said NAB's market strategist Tapas Strickland.
“A stable to lower inflation outlook means there is no urgency for the Fed to hike rates,” he added. “An early 2019 pause is thus becoming more probable.” — Reuters