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Asian stocks take cue from Wall Street positivity

Asian stocks take cue from Wall Street positivity

Asian stocks advanced again on Monday as positivity on Wall Street and the absence of further escalation in trade tensions paved the way for a steady session and a bright start to the new week.

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By Staff Journalist 10.07.2018

Asian stocks advanced again on Monday as positivity on Wall Street and the absence of further escalation in trade tensions paved the way for a steady session and a bright start to the new week.

Greater China markets performed the best, with Hong Kong’s Hang Seng Index soaring upward late in the day, backed by notable gains in the services and material sectors. The mainland stocks also prospered, with the Shanghai Composite closing at 2,815.51, a 2.49% increase supported by marked gains for banks and insurers.

The smaller Shenzhen Composite started the week well, as it gained 2.51% to finish on 1,574.54. The blue-chip CSI 300 Index rounded out the mainland uptick with a 2.8% increase on Monday.

In Japan, the Nikkei 225 finished on 22,052.18, climbing 1.21% from the earlier session as a plethora of sectors saw broad gains. Among the best performers on the index were banking, pharmaceuticals, electric appliances and metal products. The Topix followed the upward trend with a 1.2% rise.

The markets were more stable in South Korea, as the Kospi climbed by 0.57% to finish at 2,285.80. Samsung Electronics is a bellwether here, and it recorded a 1.56% increase, but steel manufacturer Posco did not fare as well, slumping by 2.4%. Tech experienced the most gains on Monday, while manufacturers declined.

Finally, BHP and the bank sector propelled Australia’s S&P/ASX 200 upward to 6,286, a 0.22% gain. The MSCI Index for Asia Pacific suggested that concerns and nervousness that were prevalent in the region during the last week are subsiding, as it rose 1.28%.

While this is a promising start, investors, analysts and markets will be keeping tabs on any developments between China and the United States, who began their trade battle on Friday with the exchange of tariffs. This did not seem to weigh on investor sentiment on Monday, however, and better-than-forecast data on US jobs buoyed regional markets.

President Donald Trump has not ruled out further tariffs, and he is due to levy an additional $16bn of Chinese goods in just 14 days. There also remains the prospect of duties extending to a further $500bn worth of Chinese products in the coming weeks.

"Trade talk, which is now becoming trade action, is creating uncertainty and starting to hurt business," David Lafferty, Natixis Investment Managers Chief Market Strategist, said. "Inflation and higher prices are the least of my worries... Disrupting global supply chains is a bigger risk than the dollar value of the tariffs themselves.”

Asian markets slumped last week due to concerns about the tariff deadline, but they have now strengthened for two successive days. US markets advanced on Friday due to impressive jobs data, which showed that the economy added 213,000 jobs last month. In response, the Dow Jones Industrial Average saw a 0.41% increase, while the Nasdaq Composite climbed by 1.34%.

The Chinese yuan has been a particular focus of attention in the escalating trade conflict, and it stayed firm on Monday, trading at 6.6203. Sue Trinh, RBC Capital Markets Head of Asia Foreign Exchange Strategy, said: “Predictably, we have seen a fair amount of short-covering in risk proxies as the dust settled over the latest blows in the trade war. How far it has to run is anyone’s guess, but make the most of it; the rally will falter as tensions pick up anew down the line.” 

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