Asian markets were tempered yesterday after two days of gains as doubts emerged over next week’s US-China trade meeting and beleaguered Japanese carmaker Nissan announced massive job cuts.
Reports that US President Donald Trump’s Trade Representative Robert Lighthizer will lead a delegation to China next week to resume trade talks buoyed markets on Wednesday.
The meeting would be the first head-to-head since negotiations were cut short in May by Trump’s surprise decision to hit China with more tariffs for what he called Beijing’s backsliding.
But a US warship sailed through the Taiwan Strait yesterday, a move that sparked concern in Beijing, while the Wednesday release of a Chinese defence white paper that accuses Washington of undermining “global strategic stability” has softened hopes of a resolution to the long-running trade battle.
Traders had “growing doubts that anything meaningful will come out of next week’s US-China face to face between US and Chinese trade delegates as non-trade-related tensions start to flare”, said Stephen Innes of Vanguard Markets. Nissan announced after the market close that it would shed 12,500 jobs, following a 95% net profit plunge in the first quarter to $59mn.
The crisis-hit automaker has struggled with weak sales in the United States and Europe and the fallout from the arrest of its former chief Carlos Ghosn.
Investors were also wary of a slump in manufacturing activity, amid signs of eurozone business growth stalling.
Innes said that weakness in US manufacturing would likely spill over into the services sector.
“When this happens in September or October, it will trigger one of the most significant US dollar and US asset sell signals of the year,” he added.
South Korean chipmaker SK Hynix posted an 89% plunge in second-quarter net profit on the back of weak demand.
More headwinds are in store for the firm and industry leader Samsung Electronics after Tokyo announced earlier this month it would restrict export to South Korea of several key materials crucial to chip manufacturing and smartphone displays.
But Japanese tech companies rallied, with chip-testing equipment maker Advantest surging 20.2% after posting better-than-expected quarterly earnings. A lacklustre start to Wednesday trade on Wall Street finished with a late surge on the S&P 500 and Nasdaq indexes despite the announcement of a regulatory crackdown on tech giants, thanks to increasingly dovish statements by central banks.
Analysts expect the European Central Bank cut rates in September, while markets are pricing in a reprieve from the Federal Reserve when it meets next week. “Equity markets continue a record run on the back of lower rates, and even the mighty Fed which hiked four times in 2018 is now ready to admit defeat and walk back its monetary policy with a rate cut in July,” said OANDA senior market analyst Alfonso Esparza.
Hong Kong finished 0.3% higher at 28,594.30, Shanghai gained 0.5% at 2,937.36 and Tokyo closed up 0.2% to 21,756.55 points at the close yesterday.
Singapore rose 0.4% while Seoul was down by the same amount.
Sydney closed up 0.6% after Reserve Bank chief Philip Lowe said he would favour further rate cuts to kickstart economic growth.
Australian Prime Minister Scott Morrison also said Canberra would race to negotiate a trade deal with Britain as its departure from the European Union looms.
On currency markets, the pound pared back modest gains on two-year lows after new Prime Minister Boris Johnson unveiled his firmly pro-Brexit cabinet on Wednesday.
An investor stands at a trading terminal in front of an electronic stock board at a securities brokerage in Shanghai. Chinese equities gained 0.5% to 2,937.36 points yesterday.