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Asian markets rise ahead of China-US trade talks

Asian markets rise ahead of China-US trade talks

Business Desk Asian markets mostly rose Thursday as regional investors began to return from their Lunar New Year break, though Tokyo edged lower after a negative lead from Wall Street. Most trading floors have re-opened but business remains light, with Hong Kong and Shanghai still closed, while focus turns on the resumption next week of China-US trade talks in Beijing. The two sides will try to hammer out a deal to resolve their long-running tariffs row, with markets broadly hopeful just three weeks before a deadline that will see the US more than double levies on hundreds of billions of dollars worth of Chinese goods. Donald Trump has said he plans to meet his Chinese counterpart Xi Jinping before the end of the month to put the finishing touches to any deal, which would be in both countries’ interest as the global economy begins to wobble. Sydney climbed more than one percent and Wellington put on 0.7 percent with investors cheered by the prospect of an extended period of low interest rates. Seoul edged up 0.1 percent and Singapore put on 0.8 percent with Manila and Jakarta also well up. However, Tokyo fell 0.6 percent despite a near 18 percent surge in SoftBank, its biggest rise in a decade, fuelled by news of a $5.5 billion share buyback using cash from last month’s listing of its mobile phone unit. On currency markets the New Zealand dollar tanked more than one percent on the back of weak jobs data, while the Australian dollar extended Wednesday’s sell-off that was fuelled by comments from the country’s top central banker hinting interest rates would not rise any time soon. Analysts pointed to their correlation to China’s economy, which is stuttering at the moment, uncertainty on Wall Street and nervousness ahead of the trade talks. Dealers are also looking ahead to the Bank of England’s latest policy meeting later in the day, which comes as the government struggles to push through its Brexit plan and concerns build that the country will leave the EU without a deal on March 29. It also follows a number of dovish statements from central banks around the world as their boards grow increasingly worried about the global economic outlook. BoE boss Mark Carney “has been quite vocally Brexit’s Angel of Death and an uber-dove for quite some time, but with central banks shifting policy stance around the world, tonight’s BoE rate decision and Carney’s missives could have a real impact on the pound”, said OANDA senior market analyst Jeffrey Halley. The pound has weakened more than two percent against the greenback in the past 12 days as investors grow increasingly worried about a so-called hard Brexit. Prime Minister Theresa May heads to Brussels Thursday in a bid to alter her deal with the EU, but with most observers saying she has very little chance of success. May will head for the meeting “with the words of the President of the European Council (Donald Tusk) ringing in her ears that there is a ‘special place in hell’ for the people who promoted Brexit without any plan to do it”, said Michael Hewson, chief market analyst at CMC Markets UK. “Given the tone of those comments … it seems highly unlikely that she’ll get any changes to the withdrawal agreement before next week’s vote in the House of Commons, if it even takes place, something that is looking increasingly unlikely.” European stock markets declined at the start of trading on Thursday, as caution prevailed before a key interest rate decision from the Bank of England. In initial deals, London’s benchmark FTSE 100 index lost 0.2 percent at 7,155.53 points compared with Wednesday’s closing level. In the eurozone, Frankfurt’s DAX 30 index sank almost 0.6 percent to 11,262.84 points on festering worries over the German economy, while the Paris CAC 40 index shed nearly 0.1 percent to 5,075.75. Later on Thursday, at 1200 GMT, the Bank of England will unveil the outcome of its latest monetary policy committee meeting. However, analysts expect BoE policymakers to keep the central bank’s key lending rate at 0.75 percent amid increasing signs Brexit uncertainty is weighing on economic activity. “It’s set to be an important day for the pound today as the Bank of England gets set to meet for its latest rate decision and quarterly look at the UK economy,” noted CMC Markets analyst Michael Hewson. “Given the weakness seen in some of the recent (data), it is hard to imagine that there will be any surprises.” Output in Britain’s dominant service sector almost ground to a halt in January, data showed this week, as the nation braces to leave the European Union at the end of March. The IHS Markit/CIPS UK services purchasing managers’ index fell to 50.1 —its lowest level in two and a half years — down from 51.2 a month earlier. A reading above 50 indicates growth. Concerns about Britain’s impending departure from the European Union dampened demand and caused firms to delay making decisions on new projects. The news followed disappointing purchasing managers’ index (PMI) readings for the both manufacturing and construction sectors in January. Some poor earnings and weak data out of Germany ensured Europe’s main bourses started lower and kept MSCI’s main index of world stocks heading for only its second two-day run of falls of the year so far. The extent of the current slowdown in the global economy was highlighted as India unexpectedly cut its interest rates and the euro got hit to $1.1346 by Germany’s fourth consecutive drop industrial output. That only compounded the 1.3 percent the euro has lost over the last week and the tailwind behind the dollar, which has risen every day since Friday’s strong U.S. jobs data. It has also recovered almost all the losses suffered after the Federal Reserve all but abandoned plans for more rate hikes last month. “Another day, another piece of terrible German data. EUR/USD risks a move to $1.1300,” said ING’s chief EMEA FX and interest rate strategist, Petr Krpata. Elsewhere the pound was struggling near $1.29 again ahead of a Bank of England meeting, while gloomy jobs data saw New Zealand’s dollar suffer a similar flop as its Australian counterpart had seen the previous day. The kiwi slid to $0.6744, losing nearly 2 percent in the past 24 hours, as investors wagered on the risk of a cut in interest rates there. The country’s central bank holds its first meeting of the year next week. Wall Street stocks fell modestly following mixed earnings and an annual presidential address that was seen as breaking little new ground on economic matters. About 15 minutes into trading, the Dow Jones Industrial Average stood at 25,370.29, down 0.2 percent. The broad-based S&P 500 also shed 0.2 percent to 2,733.54, while the tech-rich Nasdaq Composite Index lost 0.1 percent at 7,395.74. President Donald Trump, while touting the health of the US economy during the annual State of the Union Address Tuesday night, said his administration’s aggressive trade negotiations with Beijing would mean an end to China’s alleged “theft” of US jobs and wealth. On Wednesday, US Treasury Secretary Steven Mnuchin told CNBC the US and China were committed to reaching an agreement by a March 1 deadline when new US tariffs are set to take effect. Snap surged 25.8 percent following its report, while Electronic Arts dived 14.7 percent. Disney was flat. (Inputs taken from agencies)

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