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US-China Trade War Thaw Hopes Boost APAC Stocks

US-China Trade War Thaw Hopes Boost APAC Stocks

2019-07-24 04:38:00
David Cottle, Analyst

APAC Stocks, Talking Points:

  • There was plenty of green on Asia Pacific stock screens
  • Reports that US trade envoys will head back to China shortly helped
  • Tension between Japan and South Korea remains a problem though

Find out what retail foreign exchange traders make of your favorite currency’s chances right now at the DailyFX Sentiment Page

Wednesday provided Asia Pacific equity investors with a generally positive backdrop and most indexes were duly higher.

A Bloomberg report released in US houses the day before said that senior US officials would be flying back to Beijing early next week for face-to-face trade talks with their Chinese opposite numbers. This news took Wall Street back close to record highs. Asian stocks also benefitted from enduring hopes that monetary policy could be loosened in both the Eurozone and US. The Federal Reserve is expected to cut interest rates on July 31. The European Central Bank meets earlier, on Thursday and, while loosening is not forecast, it may well flag up the strong likelihood of more accommodation ahead.

Given both those stories it should be no surprise that Asian stocks were higher. The Nikkei added 0.5%, Shanghai 1% and Hong Kong’s Hang Seng 0.9%. South Korea’s Kospi remained under a bit of pressure however.

Apple supplier LG Display slipped on news of a larger-than expected second quarter operating loss. The company also said it wanted to broaden its own supplier base in view of ongoing trade tensions with Japan.

Banks Boost ASX

Australia’s ASX 200 was up 0.7% as its close loomed. Banks led the way with solid gains for the ‘big four.’ Some gold miners did less well despite a rather constructive global gold price picture. St. Barbara’s shares fell with investors possibly disappointed with output guidance. Regis Resources also slipped again, with broker downgrades likely to blame.

European Currencies Feel the Heat

The Euro and British Pound were both lower as markets eyed both the upcoming ECB meeting and the election of Boris Johnson as leader of the governing Conservative Party. Johnson campaigned in staunch rhetoric, promising to take the United Kingdom out of the European Union by October 31 ‘come what may.’ It remains to be seen how this will be achieved given the mired Parliamentary mathematics.

GBPUSD remains in a clearly accelerating daily chart downtrend, but the advent of ‘Boris’ was very well flagged and the markets have not so far been minded to take the pair back down as far as its post-Brexit-referendum lows.

British Pound VS US Dollar Daily Chart

They are quite close thoughnow, in the $1.23 region.

The rest of the session offers a plethora of Purchasing Managers Index data from across Europe and the US, but they may need to seriously diverge from expectations to have much impact against the current busy backdrop.

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--- Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.