Asian Stocks Talking Points:
- Asian stocks were broadly higher, with gains of nearly 2% common
- Oil prices did better, adding around 5%
- Investors like the US/China trade thaw, but will need to see more progress
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Asia Pacific the stocks started the week well in the green as investors cheered the trade truce hammered out between the United States and China at the Group of 20 Summit meeting in Argentina. Oil prices also soared on the news, with markets also eying production cuts from Saudi Arabia and Russia.
Beijing and Washington have agreed that proposed US tariff increases will be suspended for 90 days while negotiators meet to discuss matters of trade contention. While this represents a thaw in trade relations between the two, it’s still not the major deal markets want. Still, as progress it has supported risk appetite across the board.
The Nikkei 225 added 1.1% with most other regional indexes up by more. Shanghai was nearly 3% higher as its own close loomed, with the Hang Seng up 2.2% and the ASX 200 adding 1.8%.
Australia is perhaps uniquely exposed to tensions between the US and China as it relies heavily on one for its export strength and the other for security. However, many other nations have versions of the same dilemma and therefore good reason to want those tensions to simmer down.
The US Dollar came under some initial pressure as the G20 deal saw growth related currencies like the Australian Dollar back in favor, at the expense of perceived havens like the Dollar and the Japanese Yen. However, the market had recently been wondering about the likely pace of US interest rate rises into 2019. A trade deal might well see the Federal Reserve on track to keep hiking for longer and this possibility saw the Dollar looking stronger.
The Aussie Dollar was well supported, focused on trade prospects rather than decidedly lackluster local data.
Crude oil prices tacked on more than 5% as investors looked to better demand prospects in the wake of the deal. Gold prices might have been expected to slide with risk aversion, but they actually picked up a little as the US Dollar slipped.
Still to come on Monday are Purchasing Managers Index data from the UK, US, Canada and Mexico. November’s employment snapshot from the US Institute for Supply Management is also coming up.
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--- Written by David Cottle, DailyFX Research
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