Asian markets rise on hopes of deal in China-US trade dispute

Asian markets rose yesterday as fears about a potentially catastrophic China-US trade war were tempered by hopes the two sides will be able to hammer out an agreement.US markets plunged on Friday after Donald Trump warned of tariffs on an additional $100bn worth of Chinese imports, to which Beijing responded by saying it would stand firm.The president’s announcement came weeks after his decision to tax imports of steel and aluminium, followed by planned levies on $50bn worth of goods from China over what Washington says is theft of intellectual property and technology.China retaliated by unveiling planned levies on $50bn worth of major US exports.Trump’s moves, part of his protectionist “America First” agenda, have rattled world markets, fearing a trade war between the world’s top two economies could reverse the tentative global recovery. “Much ink has been spilt over trade wars in the last few days, and we now wait to see what the Trump administration does next,” Stephen Innes, head of forex trading for Asia Pacific at OANDA, said in a note.There are hopes Trump’s headline-grabbing tariffs are part of a plan to take a harsh line as a bargaining tactic towards a deal with China.And on Sunday Trump tweeted that he saw an end to the dispute, saying: “China will take down its trade barriers because it is the right thing to do.” However top advisor Larry Kudlow, who has often suggested the tariffs might not go into effect, warned Friday the announcements were not negotiating tactics, while Treasury Secretary Steven Mnuchin said the White House hoped to negotiate but acknowledged a trade war was a possibility.All three main indexes on Wall Street ended more than 2% down on Friday.But US futures rose yesterday and Asian markets, after fluctuating in early trade, pushed higher.Tokyo ended 0.5% higher, Hong Kong climbed more than 1%, Shanghai was 0.2% up and Sydney put on 0.4%. Singapore was 0.2% higher, Seoul gained 0.6% and Wellington added 0.7%, while Taipei, Bangkok and Jakarta also rose.“Focus this week will remain the trade issues between the US and China...as some people began to have an optimistic view on the outcome of the issue. It’s getting harder to predict what will come next,” SBI Securities said in a commentary.Investors will be keeping a close eye on comments today by Chinese President Xi Jinping at the Boao Forum — dubbed the Asian Davos — to see if he comments on the brewing row.Greg McKenna, chief market strategist at AxiTrader asked: “Will Xi crank the handle on rhetoric or will he strike a more conciliatory tone?”A report Friday showed the US created far fewer jobs than expected in March, tempering expectations of sharp interest rate rises by the Federal Reserve. Markets tanked in February on worries a stronger economy and rising inflation would prompt the central bank to raise rates more than initially thought, bringing an end to years of crisis-era stimulus.Fed boss Jerome Powell signalled it still plans to press ahead with additional increases this year but did not provide a timeline or idea about the number of increases. “The Fed seems likely to keep raising interest rates every quarter this year and probably in 2019 as well.If it wants policy to bite and slow down growth then interest rates need to go above neutral — still about 1% higher than current levels — which is probably in (the second half of) 2019,” said Richard Jerram, chief economist at Bank of Singapore. The dollar held up against its main peers, with yen traders awaiting Bank of Japan governor Haruhiko Kuroda’s speech later in the day as he starts his second term.In Tokyo, the Nikkei 225 closed up 0.5% to 21,678.26 points and Hong Kong — Hang Seng ended up 1.3% to 30,229.58 points yesterday.