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Asia stocks edge higher, investors cautious on US-China trade talks

Reuters  |  TOKYO 

By Shinichi Saoshiro

(Reuters) - Asian stocks edged up on Friday as investors kept a cautious watch on developments in U.S.-trade negotiations, with the dollar perched near a five-month peak after the benchmark yield hit its highest in seven years.

MSCI's broadest index of shares outside was 0.1 percent higher. The index was headed for a 1 percent loss this week.

Japan's Nikkei rose 0.25 percent, South Korea's was up 0.4 percent and Australian stocks dipped 0.15 percent.

Hong Kong's Hang Seng rose 0.25 percent and climbed 0.3 percent.

Wall Street ended slightly lower on Thursday as investors grappled with U.S.-trade tensions after U.S. said that "has become very spoiled on trade".

But helping ease some of the tension, has offered Trump a package of proposed purchases of American goods and other measures aimed at reducing the U.S. trade deficit with China by some $200 billion a year, U.S. officials familiar with the proposal said.

A second round of talks between senior officials and their Chinese counterparts started on Thursday, focused on cutting China's U.S. trade surplus and improving intellectual property protections.

"Trump does not do the actual trade negotiations, which are done by officials from both sides," said Kota Hirayama, senior emerging at in

"China should be well accustomed to Trump's ways by now. Judging from how the talks are proceeding so far, there is a greater chance of the negotiations ending in some sort of a compromise instead of falling through, and such an outcome would bode well for risk sentiment," he said.

In currencies, the dollar index against a basket of six major currencies was steady at 93.498 after rising to a five-month peak of 93.632 on Thursday.

The index has gained about 1 percent this week, buoyed by the surge in yields, with the 10-year note yield hitting a seven-year peak of 3.128 percent.

The euro was up 0.1 percent at $1.1807, but not far off a five-month trough of $1.1763 brushed on Wednesday. The currency has fallen nearly 1.2 percent this week, largely pressured by Italian political uncertainty.

Reports this week that Italian populist parties likely to form the country's next government may ask the European Central for debt forgiveness have raised concerns about abandoning fiscal discipline.

The dollar extended an overnight rally and rose to 110.990 yen, its highest since late January. The greenback has gained nearly 1.4 percent against its Japanese peer this week.

Emerging market currencies have also lost ground against the dollar this week as the rise in U.S. yields showed little signs of slowing.

The Turkish lira fell to a record low against the dollar this week, the Brazilian real plumbed a two-year low while Mexico's peso has shed more than 5 percent this month.

A retreat by Indonesia's rupiah to a 2-1/2-year low prompted the central to tighten monetary policy on Thursday for the first time since 2014 to support the currency.

"Perhaps the most unnerving aspect of the recent rupiah weakness has been the sheer speed in which the currency markets have turned against some emerging market countries," wrote Sean Darby, at Jefferies.

"However, policy credibility is the most and the fact that the Indonesian central has begun to tighten ought to alleviate some of the FX pressures."

In commodities, Brent were 30 cents higher at $79.60 a barrel after rising to $80.50 on Thursday, their highest since November 2014.

Brent has risen 3 percent this week and is headed for a sixth week of gains.

A rapid slide in from Venezuela, concern that U.S. sanctions will disrupt exports from Iran, and falling global inventories have all combined to push up nearly 20 percent in 2018.

Inflation concerns, strong U.S. economic indicators and worries over increasing debt supply have pushed Treasury yields higher this week.

(Reportijg by Shinichi Saoshiro; Editing by and Eric Meijer)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, May 18 2018. 08:51 IST