Asian markets surge on renewed hopes of trade deal
Asian markets surged Wednesday, following new hope on the trade front and strong gains on Wall Street.
President Donald Trump tweeted Tuesday that he’d had “very good telephone conversation” with China’s President Xi Jin ping, and said they would have “an extended meeting” during the G-20 meeting in Osaka, Japan, later this month. That was enough to rally Wall Street, which saw the S&P 500 index SPX, +0.97% climb 28.08 points, or 1% to 2,917.75. The Dow DJIA, +1.35% gained 353.01 points, or 1.4%, to 26,465.54, and the Nasdaq COMP, +1.39% jumped 108.86 points, or 1.4%, to 7,953.88. The benchmark S&P 500 is now less than 1% below its all-time high set on April 30.
Markets also got a boost after the head of the European Central Bank, Mario Draghi, said the bank was ready to cut interest rates and provide additional economic stimulus if necessary. The remarks put the spotlight on the U.S. Federal Reserve, which has its own decision on interest rates scheduled later in the day. Many think the U.S. central bank may be headed for its first interest rate cut in over a decade sometime later this year.
Japan’s Nikkei NIK, +1.72% gained 1.8%, despite data that showed exports in May fell for a sixth straight month, and Hong Kong’s Hang Seng Index HSI, +2.41% surged 2.4%. The Shanghai Composite SHCOMP, +0.96% rose 1.5% while the smaller-cap Shenzhen Composite 399106, +1.48% jumped 2.2%. South Korea’s Kospi 180721, +1.24% rose 1.2% and benchmark indexes in Taiwan Y9999, +1.97% , Singapore STI, +1.35% , Malaysia FBMKLCI, +0.83% and Indonesia JAKIDX, +0.99% all advanced. Australia’s S&P/ASX 200 XJO, +1.19% rose 1%.
Among individual stocks, Japan Display 6740, +10.91% skyrocketed after Apple Inc. AAPL, +2.35% appeared willing to help the struggling maker of iPhone screens. SoftBank9984, +4.03% and Inpex 1605, +5.63% also made strong gains in Tokyo trading. In Hojng Kong, Apple component makers Sunny Optical 2382, +9.97% and AAC 2018, +4.49% leapt higher, along with Sands China 1928, +5.04% and food processing company WH Group 288, +5.28% Samsung 005930, +2.25% and chip maker SK Hynix 000660, +5.99% rose in South Korea, amd Taiwan Semiconductor 2330, +3.61% advanced in Taiwan. In Australia, Beach Energy BPT, +3.08% and Rio Tinto RIO, +1.94% rose.
Trump stirred fresh optimism among investors when he said he will hold talks with Chinese President Xi Jinping at an international summit in Japan. U.S. businesses have implored Trump to stop escalating the trade war and refrain from expanding his tariffs to $300 billion on goods from China.
Analysts acknowledged an immediate resolution to the trade conflict isn’t expected, but the confirmation that Trump and Xi plan to talk at the G-20 in Osaka was cause for some optimism while warning that risks remain.
“While this certainly is a near-term boost for markets, the question as to what can be resolved by the two leader’s meeting that had not been done so despite months of discussions keeps this as a risk factor,” said Jingyi Pan, market strategist at IG in Singapore.
Two weeks ago, Fed Chair Jerome Powell set off a rally on Wall Street after he signaled that the central bank is willing to cut interest rates to help stabilize the economy if the trade war between Washington and Beijing starts to crimp growth. Any continued escalations could put the brakes on what is poised to be the longest economic expansion in U.S. history.
Investors collectively envision a Fed rate cut by July and possibly further cuts after that. Some even expect a rate cut this week. Many economists, though, think the Fed will wait until September at the earliest to announce its first drop in its benchmark short-term interest rate since 2008 and might not cut again in 2019. A few Fed watchers foresee no rate cut at all this year.
Benchmark crude oil CLN19, +0.28% rose 19 cents to $54.09 a barrel. It rose 3.8% to $53.90 a barrel Tuesday. Brent crude oil BRNQ19, +0.34% , the international standard, rose 7 cents to $62.23 a barrel.
The dollar USDJPY, -0.04% rose to 108.34 yen from 108.27 yen on Tuesday.