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Asian markets bounce on bargain buying

Asian markets bounce on bargain buying

HONG KONG, July 12: Asian markets on Thursday recovered from the previous day’s hammering, oil prices bounced and the dollar extended a rally on the back of expectations the US is better prepared to deal with a trade war with China, reports AFP. While investors remain on edge about a damaging standoff between the world’s two economic superpowers, there are hopes the two sides will avoid an escalation despite Donald Trump threatening tariffs on a further $200 billion of Chinese goods. The optimism helped bargain buying Thursday, with Tokyo ending more than one percent higher and Hong Kong adding 0.8 percent. Shanghai jumped 2.2 percent as the Chinese central bank set the struggling yuan’s US dollar fix at a strong level in a bid to sooth concerns about its recent sell-off, while the official Xinhua news agency in a commentary said the country’s equity market fluctuations were controllable. The remarks suggested leaders were ready to step in if needed, analysts said. Sydney, Singapore, Seoul and Taipei were also deep in positive territory. However, Stephen Innes, head of Asia-Pacific trading at OANDA, warned “we are little more than a headline away from another risk-off episode” and added that markets would likely remain volatile for some time. “The prospects of another round of US tariffs directed at China have resurrected fears that the trade skirmish between Washington and Beijing could escalate with some investors now fearing a full-blown global trade war could be a reality,” he said. “But the most damning signal is that dialogue… is pretty much non-existent and with a diplomatic solution appearing more unlikely as the days go by markets will remain on the defensive.” Japan’s Nikkei has been given an extra nudge by a weaker yen, which helps exporters. Tokyo’s benchmark Nikkei index jumped more than 1.0 percent on Thursday, supported by a cheaper yen against the dollar, as investors digested concerns over a US-China trade war. The Nikkei 225 index advanced 1.17 percent, or 255.75 points, to 22,187.96, while the broader Topix index was up 0.46 percent, or 7.80 points, at 1,709.68. “Japanese shares are seen supported by a cheaper yen against the dollar in early trade despite falls in US shares,” Okasan Online Securities said in a commentary. The dollar fetched 112.25 yen in Asian afternoon trade, against 112.03 yen in New York and 111.05 yen in Tokyo on Wednesday. “The market sharply reacted to the fresh US tariffs on Chinese goods yesterday, but trading is calming as the actual impact of the trade dispute appears not to be imminent,” said Hikaru Sato, senior technical analyst at Daiwa Securities. “However, the dispute may affect investors’ sentiment at any time if fresh news hits the market again,” Sato told AFP. President Donald Trump’s administration late Tuesday launched the process to impose fresh tariffs on another $200 billion in Chinese goods, an escalation only days after tit-for-tat duties on $34 billion in goods came into effect. Beijing vowed to retaliate against the latest move, calling the US action “totally unacceptable.” The development sent global stocks tumbling on Wednesday, and on Wall Street the Dow dropped 0.9 percent. In Tokyo on Thursday, Sony rose 0.90 percent to 5,794 yen and Panasonic edged up 0.39 percent to 1,404 yen. Market heavyweight Fast Retailing, the operator of Uniqlo casual wear, surged 3.81 percent to 49,230 yen. Toyota jumped 1.43 percent to 7,234 yen with Nissan up 0.19 percent at 1,022 yen. Despite the currency’s popularity as a safe have in times of turmoil, the yen is at a six-month low against the dollar, which is getting support from the robust US economy. While most other countries are seeing improvement, data shows the US is surging as jobs creation picks up and wages rise. News that producer price inflation hit a more than six-year high in June added to expectations the Federal Reserve will hike interest rates again soon, in turn strengthening the dollar. The strong readings coming out of Washington suggest the US is in a much stronger position to fight a trade war with China, which is battling slowing growth and a crippling debt mountain among other things. But Marito Ueda, senior dealer at FX Prime, said there are also hopes for a China-US deal to avoid a trade war. “Even though concerns remain over US-China trade frictions, the dollar remains stronger (against the yen) as traders believe there will be a political settlement at some point to avoid an all-out trade war,” he told AFP. The US unit was also up against the euro and most other high-yielding currencies. On oil markets both main contracts edged up after being sent into freefall Wednesday — Brent dived around six percent and WTI shed about five percent – by worries about the stronger dollar and the impact of a trade war on demand. The selling was fanned by news that major producer Libya had resumed exports from four eastern ports following a disruption caused by clashes in the war-torn country. In Hong Kong, Chinese telecoms equipment maker ZTE cruised 22 percent higher as it moved a step closer to having US sanctions lifted by signing an agreement to put $400 million in escrow to cover any future violations. The move comes after it agreed to pay a $1 billion fine and make the escrow placement in return for the lifting of a seven-year ban on US firms selling to it, which had put in on the edge of collapse. In early European trade London and Paris each added 0.2 percent and Frankfurt gained 0.3 percent. The pan-European STOXX 600 inched up just 0.2 percent though, with gains in the healthcare and consumer sectors offset by losses in the banking sector and in energy firms after the dramatic drop in oil prices. Germany’s 10-year bond yield and the euro were both broadly steady with traders awaiting minutes from the most recent European Central Bank meeting. A Reuters report showed its policymakers remain split on when to raise interest rates next year. The difference between 10-year U.S. Treasuries and equivalent German Bund yields stood near 30-year highs at 2.59 percent. “If stocks drop sharply then the Fed will pause and, moreover, we think the U.S. is toward the end of its rate hike cycle,” said Thu Lan Nguyen, an FX analyst at Commerzbank in Frankfurt. Focus was still on what the next steps in the tit-for-tat trade conflict might be. China has accused the United States of bullying and warned it could hit back, although the form of retaliation is not yet clear. The retaliatory options available to China include boycotting American goods, sharply devaluing the yuan, and selling off U.S. Treasury holdings, Xiao Minjie, senior economist at SMBC Nikko Securities in Tokyo, wrote in a note. China’s yuan had strengthened 0.3 percent overnight though,, partially recovering from a big slide the previous day after an official currency market level set by the People’s Bank of China was not as weak as some had feared. “It shows the central bank intends to stabilize the market and calm investors. One-way speculation on the yuan’s depreciation is not in Chinese authorities’ interests,” said Qi Gao, Asia FX strategist at Scotiabank in Singapore. The dollar index against a basket of six major currencies was steady at 94.700 after gaining 0.6 percent overnight. Against the yen, which usually strengthens in times of political tension and market turmoil, the greenback stretched its overnight rally and rose to 112.385 yen, its highest since January. Commodity-linked currencies such as the Australian dollar crawled higher having suffered deep losses on Wednesday. The Canadian dollar was also shade higher at C$1.3201 per dollar following a loss of 0.75 percent the previous day. In commodities there was also stabilization. Brent crude futures rose 1.5 percent to $74.52 a barrel after tanking 6.9 percent on Wednesday, after the trade tensions and signs Libya’s oil exports could pick up again, triggered the biggest one-day percentage drop since February 2016. Metals were recovering from their own 2-4 percent meltdown too. Copper on the London Metal Exchange rose 0.8 percent to $6,194.00 a ton. The industrial metal sank nearly 3 percent on Wednesday, plumbing a one-year low of $6,081.00.

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