Asian stocks hit six-week high on trade war hopes

US and China make trade concessions, while the European Central Bank is expected to unveil new stimulus measures.

Stock markets across the region rose on hopes the world's top two economies are getting closer to ending their trade war [File: Rick Rycroft/AP]

Asian stocks hit a six-week high on Thursday on hopes for a thaw in trade frictions between the United States and China, and expectations that the European Central Bank (ECB) would kick off another wave of monetary easing by global central banks.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.4 percent and Japan’s Nikkei stock index rose 0.88 percent. Australian shares were up 0.56 percent.

Chinese stocks rose and the yuan hit a three-week high after US President Donald Trump agreed to delay an additional increase in tariffs on Chinese goods by two weeks at the request of China’s Vice Premier Liu He “as a gesture of goodwill”.

US stock futures jumped 0.42 percent and safe-havens such as the yen, US Treasuries, and gold weakened in a sign of improving appetite for risk.

“Trump’s comments are likely to put a little juice in the market, but it could be gone tomorrow,” said Hugh Dive, chief investment officer at Atlas Funds Management in Sydney.

“Some in the market react to small changes in negotiating positions because Trump is negotiating in the open. I’m more concerned about Brexit, because there is some complacency in the EU about this.”

Oil prices rose in Asia, rebounding from a tumble on Wednesday, on hopes Organization of the Petroleum Exporting Countries (OPEC) members will cut output to support prices.

Any easing of concerns about the bruising trade war is likely to help equities extend their rally this month after a tumultuous August.

Investors also await an ECB meeting later on Thursday to see how far policymakers will go to support a flagging economy, given the risks posed by Brexit, Britain’s divorce from the European Union.

The S&P 500 ended 0.72 percent higher in New York on Wednesday.

The dollar briefly rose to a six-week high of 108.11 yen before paring gains slightly to trade up 0.17 percent at 108.04 yen.

The yield on benchmark 10-year Treasury notes rose to 1.7541 percent, the highest in more than five weeks, extending a sell-off in government bonds that started on Sept. 4.

Spot gold fell 0.29 percent to $1,493.00 an ounce.

Trump’s delay of additional tariffs on Chinese goods comes one day after China said it would exempt 16 types of US products from import tariffs.

The world’s two largest economies have been locked in a year-long battle over Beijing’s trade practices that has threatened to push other economies into recession.

The gestures of goodwill raise hopes both sides can narrow their differences before working-level talks resume in mid-September and high-level trade negotiations that are expected in October.

In offshore trading, the yuan rose to a three-week high of 7.0870 to the dollar, while Chinese shares rose 0.35 percent on renewed optimism about trade talks.

The euro held steady at $1.1013 but traded near a one-week low. The ECB is set to unveil fresh stimulus measures on Thursday but its exact moves are far from certain.

Germany is at risk of falling into recession with inflation expectations sliding, but ECB President Mario Draghi, who hands over the leadership to Christine Lagarde at the end of October, will face resistance to aggressive easing from more conservative ECB members.

US crude ticked up 0.77 percent to $56.18 in Asia on Thursday. Futures tumbled more than 2 percent on Wednesday, following a report that Trump is considering easing sanctions on Iran, which could potentially boost oil supplies.

Asian traders were likely focused on OPEC’s decision on Wednesday to cut its forecast for global oil demand in 2020. OPEC also said all producers have a shared responsibility to support the oil market.

Sterling traded at $1.2328, little changed following a 0.24 percent decline on Wednesday after a Scottish court ruled that Prime Minister Boris Johnson’s suspension of the British Parliament was unlawful.

Political wrangling over the terms of the UK’s exit from the EU has weighed on the outlook for the British pound.

Source: Reuters