Conflicting US statements on China trade send stocks on wild ride
US trade adviser Peter Navarro says trade deal with China is ‘over’, but President Trump then says it is ‘fully intact’.
Asian shares see-sawed on Tuesday following confusing statements from the White House over the United States-China trade deal, with President Donald Trump later clarifying the pact was “fully intact”.
Trump’s tweet bolstered market sentiment, helping e-mini futures contracts for the US S&P 500 index swing back to positive territory after falling as much as 1.6 percent. Asian shares were quick to turn around too, with MSCI’s broadest index of Asia Pacific shares outside of Japan up 0.7 percent.
Stocks had taken a knock early in the Asian day after White House trade adviser Peter Navarro said in a television interview that the phase one trade deal signed with China in January was “over”, linking the breakdown in part to Washington’s anger over Beijing not sounding the alarm earlier about the coronavirus outbreak.
The comment caused a kneejerk selloff in equities markets, although sentiment turned around quickly after a statement from Navarro that his comment had been taken out of context.
Navarro is not the decisive voice on the future of the trade deal. The architect of the agreement, Trade Representative Robert Lighthizer, said last week that the phase one agreement is “enforceable” and the US fully intends to carry it through.
China’s foreign and commerce ministries did not immediately respond to a request by the Bloomberg news agency for comments on Navarro’s Fox News interview.
“With the White House, you can never be sure whether they are voicing their own position or the official position,” said Moh Siong Sim, Singapore-based forex analyst at the Bank Of Singapore.
“If he’s speaking about his own position, it’s pretty much consistent with Navarro. We know he is a hardliner … [but] ultimately it’s Trump who decides whether the trade deal is on or off.”
Trump soothed nerves when he tweeted: “China trade deal is fully intact. Hopefully they will continue to live up to the terms of the agreement.”
In response, China’s blue-chip index regained its losses to gain 0.3 percent while Hong Kong’s Hang Seng climbed 0.7 percent.
Australia’s S&P/ASX 200 rose 0.1 percent while Japan’s Nikkei added 0.8 percent.
Asian stocks have rallied strongly since hitting a low in March amid worries about the jolt to the global economy from the coronavirus-driven shutdowns.
The gains have been driven by hefty central bank stimulus measures around the globe and a gradual easing of restrictions, although worries about a second wave kept investors jittery.
On Monday, Beijing reported its second straight day of record COVID-19 infections, while new cases and hospitalisations in record numbers swept through more US states. New York City, the epicentre of the US outbreak, eased restrictions after 100 days of lockdown.
New infections spiked in Latin America, Brazil in particular.
On Wall Street overnight, the Dow rose 0.59 percent, the S&P 500 gained 0.65 percent, and the tech-heavy Nasdaq added 1.11 percent to set a record closing high.
In currencies, the safe-haven yen slipped against the dollar to 107.17, while the euro was a shade higher at $1.1265.
The risk-sensitive Australian dollar was up 0.3 percent at $0.6925. Its New Zealand counterpart was flat at $0.6478, having pared its losses.
In commodities, US crude fell 0.3 percent, or 12 cents, to $40.61 a barrel, while Brent was flat at $43.08.
As investors piled on equities, spot gold was down 0.2 percent at $1,750.5 an ounce.