Asian markets staged an afternoon recovery yesterday following upbeat Chinese trade data, but gains were patchy with drugs firms hit by Donald Trump’s promise to slash prices.
This week has seen equity and forex traders take a step back after February’s rally, with Friday’s US jobs data in focus and the Federal Reserve preparing for a much-anticipated policy meeting on March 14.
Pharma firms tumbled in New York and across Europe after Trump tweeted: “I am working on a new system where there will be competition in the Drug Industry.
Pricing for the American people will come way down!”
That came as Republicans released plans to tear up key parts of Obamacare, fuelling worries about cutbacks.
The losses seeped through to wider stock markets in the morning but news that Chinese imports had surged 38.1% in February — almost twice as much as forecast in a Bloomberg survey — provided a platform for recovery.
The import jump, along with a 1.3% fall in exports, led to a shock trade deficit — its first in three years — and fuelled hopes that the world’s number two economy and key driver of global growth is showing signs of improvement on the domestic front.
Beijing is trying to reconfigure the economy from one driven by exports and state investment to one based on domestic consumption.
The figures follow upbeat reports on 2016 growth and factory activity.
Imports surged as economic activity recovers and commodity prices increase, Wen Bin, a researcher at China Minsheng Banking Corp in Beijing, told Bloomberg News.
“Exports missed estimates mostly because trade is generally very volatile in the first two months due to the Chinese New Year factor.”
Shanghai closed 0.1% down — having shed 0.4% at one point — while Hong Kong ended up 0.4% for a third-straight gain.
On Tuesday, the People’s Bank of China said its foreign exchange reserves unexpectedly bounced back above $3 tn in February, indicating tighter controls have staunched a flood of cash out of the country as the US prepares to raise borrowing costs.
The bank has spent hundreds of billions trying to curb the capital flight, with the yuan struggling at eight-year lows against the dollar. “It suggests that Chinese authorities have indeed managed to stem the capital flight that so many investors are worried about.
Naturally it’s done that through capital controls,” said Greg McKenna, chief market strategist at CFD and forex provider AxiTrader.
“It doesn’t mean China is out of the woods, especially with the Fed about to embark on a rate hike cycle, but it seems the pressure has been released for the moment.”
Sydney was flat, Seoul added 0.1%, Singapore gained 0.3% and Wellington put on 0.2%.
Taipei climbed 0.2% and Manila 0.3% However, Tokyo held on to losses and fell 0.5%, with investors unmoved by revised data showing the Japanese economy grew more than first estimated in the final quarter of 2016 but still missing expectations.
In Hong Kong Chinese telecoms giant ZTE surged more than 6% after agreeing to pay a $1.2bn fine to US authorities for breaking laws restricting the sale of goods to Iran and North Korea.
Analysts said the deal ended long-running uncertainty about its ability to trade in the world’s biggest economy. Focus now turns to US non-farm payrolls figures on Friday, which will be followed by the Fed policy meeting.
In Tokyo, the Nikkei 225 closed down 0.5% to 19,254.03 points; Hong Kong — Hang Seng edged up 0.4% to 23,786.31 points and Shanghai — Composite fell 0.1% to 3,240.66 points at the close yesterday.
People walk outside the Hong Kong Stock Exchange building. The Hang Seng edged up 0.4% to 23,786.31 points yesterday.
