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Global Markets: China rebound drives Asian shares higher

Reuters  |  SHANGHAI 

By Andrew Galbraith

SHANGHAI (Reuters) - Shares in recouped early losses on Friday, buoyed by strong gains in as signs of progress in trade talks with the offset worries about a deteriorating global economic outlook.

MSCI's broadest index of shares outside was 0.3 percent higher by mid-afternoon, having spent the day dipping in and out of negative territory.

Spread-betters expect an uneven performance in Europe, with London's FTSE seen up 0.1 percent at the open, Frankfurt's DAX down 0.1 percent and Paris' CAC down 0.2 percent.

Chinese shares rallied in the afternoon after a tentative start as optimism over trade talks reasserted itself, pushing the blue-chip index 2.2 percent higher. For the week, the it gained 5.4 percent, its strongest week since November 2015.

stocks had faltered earlier on investor concerns over slowing domestic growth and on indications that Chinese authorities will resort to a benchmark lending rate cut only as a last resort to boost the economy.

Growth in China's new home prices fell to a nine-month low in January as broader economic weakness increasingly weighs on the property sector and consumer confidence.

Japan's Nikkei ended 0.2 percent lower after data showed core consumer inflation accelerated slightly in January but remained far from the central bank's 2 percent target, underscoring the fragility of the country's economic recovery.

Australian shares gained 0.5 percent and Seoul's Kospi reversed earlier losses to end up 0.1 percent.

A combination of trade talks and Federal Reserve caution over further rate hikes has provided support to riskier assets, including equities, in recent sessions, said Rob Carnell, chief economist and head of research, at ING.

But with a more dovish Fed and some sort of trade deal already priced in, further developments on trade "haven't really been having anything like the impact in markets that they would have done a week or a couple weeks or months ago," he said.

Nevertheless, investors continue to closely watch high-level talks between U.S. and Chinese trade negotiators in Washington, with little more than a week left before a U.S.-imposed deadline for an agreement expires, triggering higher tariffs.

reported exclusively on Wednesday that the two sides were drafting language for six memorandums of understanding on proposed Chinese reforms, progress that had helped to lift investor sentiment.

Chinese will meet with U.S. at the on Friday, the said.

Amid the trade discussions, new data from the U.S. Thursday highlighted its economic outlook is also growing cloudy.

The said on Thursday that domestic orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 0.7 percent.

Moreover, the factory sector fell into contraction territory in February for the first time since May 2016, data from the showed.

"While global is weak, services activity is looking more positive. But it is difficult to see and services diverging for long," analysts at said in a morning note.

"There are strong multiplier effects from that imply downside risks to the services sector, particularly in And trade uncertainty, which is overhanging the manufacturing sector, needs to be resolved."

The yield on benchmark 10-year Treasury notes edged lower to 2.6824 percent Friday, compared with a U.S. close of 2.688 percent on Thursday as a bump from investor optimism about trade talks progress ebbed.

The two-year yield, watched as a gauge of expectations of higher Fed fund rates, eased to 2.5204 percent from a U.S. close of 2.529 percent.

AUSSIE REBOUND

The Australian dollar rebounded after tumbling more than 1 percent on Thursday on a report that China's northern has placed an indefinite ban on imports of Australian coal.

On Friday, Reserve of cautioned against seeing restrictions as being directed at Australia, and said the ban does not point to a souring of ties between the countries.

Separate comments by Lowe that a rate hike may be appropriate next year also helped to boost the Aussie dollar.

It was last up 0.2 percent at $0.71025.

The U.S. dollar edged up against the yen to 110.76, while the euro gained less than 0.1 percent to buy $1.1342.

The dollar index, which tracks the greenback against a basket of six major rivals, was steady at 96.611.

U.S. crude turned around from small declines to rise 0.1 percent to $57.01 a barrel. Brent crude was nearly unchanged at $67.09.

Gold rebounded after falling more than 1 percent on Thursday, with spot gold trading up about 0.2 percent at $1,325.16 per ounce. [GOL/]

(Reporting by Andrew Galbraith; Additional reporting by Richard Leong in NEW YORK; Editing by & Kim Coghill)

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

First Published: Fri, February 22 2019. 13:00 IST
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