Asian markets mixed; Chinese yuan rises

Big 5

Asian markets traded mixed on Wednesday afternoon, after U.S. President Donald Trump hinted once again that a closely watched trade deadline in March may be pushed back.

Mainland Chinese markets slipped by the end of the morning session. The Shanghai composite declined around 0.15 percent while the Shenzhen component shed 0.319 percent. The Shenzhen composite also slipped 0.36 percent.

Hong Kong’s Hang Seng index rose 0.66 percent. Hong Kong-listed shares of Chinese investment bank China International Capital Corp jumped 3.07 percent after an exchange disclosure showed on Monday that tech behemoth Alibaba had increased its stake in the company to almost 12 percent.

Japan’s Nikkei 225 rose 0.34 percent in afternoon trade while the Topix gained 0.21 percent as shares of robot maker Fanuc advanced 0.34 percent. Over in South Korea, the Kospi added 0.88 percent.

The ASX 200 in Australia slipped 0.31 percent in afternoon trade as the sectors mostly traded lower.

“Global financial markets continue to trade with a cautiously optimistic tone in the current environment,” Rakuten Securities Australia said in a morning note.

“Investors are craving clarity on a number of issues that are affecting market sentiment and there’s a chance they could have some more answers by the end of the week,” they said.

Trump said Tuesday that trade talks with China are going well, adding the current March deadline is not a “magical date.” Both countries have until then to come up with a deal. Otherwise, additional U.S. tariffs on Chinese products could take effect. Trump indicated last week, however, he would be willing to push back the deadline.

“If we do have that deadline pushed out, it at least allows the two parties to reach a sort of framework for agreeing something around those more structural, difficult long-term issues,” Isaac Poole, chief investment officer at Oreana Financial Services, told CNBC’s “Street Signs” on Wednesday.

An agreement between the U.S. and China around issues such as the trade deficit and currency stabilization are the “easiest” parts for the two parties to achieve, Poole said.

“Things like intellectual property transfer and those longer term structural issues, they’re going to take longer than 60 days. They’re going to take longer than 90 days to reach an agreement,” he added.

Representatives from the U.S. and China are meeting in Washington this week to resume trade negotiations, with high level discussions set to happen later in the week, the White House said Monday.

Chinese yuan moves

Also on Tuesday, Bloomberg News reported that the U.S. is requesting that China keep the yuan stable as part of the trade deal.

The move would be aimed at mediating any effort by the Chinese to devalue the yuan to counter American tariffs, people familiar with the situation told Bloomberg News. The Trump administration has insisted that moves to devalue the yuan to buoy Chinese exports would be countered with additional or more severe American tariffs, sources told Bloomberg News.

The report sent the offshore Chinese yuan on a path of strong gains. It last traded at 6.7250 against the greenback, after seeing levels above 6.78 yesterday. The onshore Chinese yuan also gained to 6.7235 against the dollar.

“We are not surprised the US government has made such a request. But the request flies in the face of another US demand for a more market‑driven (offshore Chinese yuan),” Joseph Capurso, senior currency strategist at Commonwealth Bank of Australia, said in a morning note.

“As we have spelled out frequently, the fundamentals are pushing (the offshore Chinese yuan) weaker, not stronger. China’s current account surplus has collapsed to only 0.4% of GDP in 2018 and interest rate spreads have narrowed,” Capurso said.

The Australian dollar was at $0.7161 after bouncing from lows below $0.712 yesterday.

“Unsurprisingly, what is good for (the offshore Chinese yuan) is also good for (the Australian dollar) given the strong trade links between China and Australia,” Capurso said.

Copper prices gain

Copper prices advanced to their highest levels since Jul. 2018 in the afternoon of Asian trading hours.

The metal’s futures for March delivery rose to $2.881 per pound as of 11:14 p.m. EST Tuesday, their highest levels since early July 2018.

Copper is often viewed as a leading indicator of economic health because of its widespread use in various sectors. It is used in home construction and consumer products, as well as manufacturing.

Other currencies and oil

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 96.515 after seeing highs around 97 yesterday. The Japanese yen traded at 110.75 against the dollar after seeing an earlier high of 110.51.

Oil prices gained in the afternoon of Asian trade, recovering from their earlier slip. The international benchmark Brent crude futures contract rose slightly to $66.48 per barrel. Meanwhile, the U.S. crude futures contract advanced 0.25 percent to $56.23 per barrel.

Source: CNBC

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