‘Calm before a potential storm’: Asian shares rise on trade hopes

Gains in Asia follow Wall Street’s approach to near record highs after progress in trade talks.

Shares in Asia were supported by optimism over progress on the first phase of the US-China trade deal, which could be signed by leaders in November [File: Andy Wong/The Associated Press]

Asian shares rose on Monday to a three-month high, tracking gains on Wall Street on hopes of a trade deal between the United States and China, possibly as soon as next month.

US and Chinese officials are “close to finalising” some parts of a trade agreement after high-level telephone discussions on Friday, the US Trade Representative’s office and China’s Commerce Ministry said, with talks to set to continue.

US President Donald Trump has said that he hopes to sign the deal with China’s President  Xi Jinping next month at a summit in Chile.

In late Asian trade, MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.5 percent to reach its highest level since late July, recording a third straight day of gains.

Japan‘s Nikkei was also higher, rising 0.3 percent to a one-year high.

Meanwhile, Chinese shares were firmer with the CSI 300, an index that includes the top stocks traded in Shanghai and Shenzhen, up 0.6 percent.

Hong Kong’s Hang Seng index jumped 0.9 percent while Australian shares climbed 0.1 percent.

The gains followed a surge in US shares on Friday, with the S&P 500 nearing its all-time high achieved in July. European markets also recorded a positive session.

E-mini futures for the S&P 500, which are electronically traded futures contracts that are one-fifth the size of standard S&P 500 futures, were firm on Monday, extending their positive momentum from last week.

Strong results from companies including Intel also boosted sentiment in the equities market. More than 81 percent of US companies have beaten expectations so far this earnings season, despite concerns about the trade war.

Investors are waiting now for earnings from the likes of Alphabet Inc , Apple, Facebook and Exxon.

Activity later in the week will be dominated by the US Federal Reserve, which markets expect is all but certain to lower interest rates at the Wednesday meeting of its  Federal Open Markets Committee (FOMC).

“The outcome of the FOMC policy meeting will most likely draw the largest market reaction,” Richard Grace, Sydney-based chief currency strategist at Commonwealth Bank told Reuters.

“We also think the risk is the FOMC will articulate a pause,” for future rate decisions, Grace added.

“That means the 27.6 percent pricing for an additional 25 bps cut in December will quickly evaporate, sending US yields and the US (dollar) higher.”

The Bank of Japan meets on Thursday. On Friday, indicators for Chinese and US manufacturing will be released.

In currencies, the US dollar index was unchanged at 97.822 against a basket of six major currencies. The Japanese yen was a tad lower at 108.72.

The United Kingdom‘s pound was barely changed at $1.2824 compared with its Friday close. This was after the European Union agreed to London’s request for a Brexit deadline extension, but set no new departure date.

That gave the country’s divided parliament time to decide on Prime Minister Boris Johnson’s call for a snap election.

Earlier, sources told Reuters the 27 EU countries that will remain after Brexit hope to agree on Monday to delay Britain’s divorce until January 31 with an earlier departure possible.

The euro was also little changed at $1.1083.

“It feels like the calm before a potential storm, where the event risk heats up with political twists and turns, key economic data and central bank meetings,” Chris Weston, Sydney-based strategist at Pepperstone told the Reuters news agency.

Oil prices slipped back after strong gains last week driven by optimism on the trade front and by falling US crude stocks.

US crude was down 14 cents to $56.52 a barrel, while Brent crude oil edged 12 cents lower to $61.90.

Source: Reuters