Asia stocks were higher on Wednesday with shares of automakers in China, Japan, and South Korea jumping following news reports that China would cut tariffs on cars made in the U.S. to 15 percent from the current 40 percent.
Japanese stocks led gains in the region: The Nikkei 225 was up more than 2 percent, while the Topic index was up 1.95 percent in afternoon trade.
Automakers were among the biggest gainers in Japan, following in the footsteps of their peers in the U.S. after reports emerged that China was moving to cut tariffs on cars.
Yamaha Motor surged 4.31 percent, Mitsubishi Motor jumped 2.75 percent, while Toyota inched up 2.24 percent. Nissan, reeling from a recent scandal involving former Chairman Carlos Ghosn, saw a more moderate gain of 0.8 percent.
Over in South Korea, stocks were also higher with the Kospi gaining 1.11 percent to 2,075.81 from Tuesday’s 2,052.97 points. The Kosdaq Index was up 1.62 percent to 671.69 from the previous close of 661.01 points.
Shares of major automakers in South Korea also jumped: Hyundai Motor surged 7.17 percent and Kia Motors gained 3.66 percent.
The same positive sentiment was seen in Chinese auto stocks, with Shanghai-listed SAIC Motor among the biggest gainers after inching up 1.35 percent.
Bo Zhuang, chief China economist at TS Lombard, said that Beijing’s intentions to cut auto import tariffs is simply “a small step in de-escalation.”
“The car import tariffs in other countries, currently they’re all 15 percent. The reduction from 40 percent to 15 percent is just an equal level with other countries, that’s all,” he told CNBC’s “Street Signs.”
China had initially cut import tariffs for all foreign-made cars and car parts from 25 percent to 15 percent in July this year. However, Beijing subsequently raised tariffs on automobiles imported from the U.S. to 40 percent amid escalating tensions with Washington.
Greater China markets were cheered by the developments. The Shanghai composite inched up 0.15 percent, but the Shenzhen composite gave up earlier gains to trade near flat. Hong Kong’s Hang Seng Index gained 1.36 percent to 23,122.23 points.
In Australia, the ASX 200 index gained 1.25 percent to 5,645.7, above yesterday’s close of 5,575.9 points.
The gains across Asia followed another volatile trading session on Wall Street amid continued uncertainties surrounding U.S.-China trade relations and the possibility of a government shutdown in Washington.
“Equities have an up and down session amid mixed US-China news … Trump threat of government shutdown doesn’t help either,” Rodrigo Catril, senior FX strategist at National Australia Bank wrote in a morning note.
US-China tensions in focus
A court in Canada granted bail to Chinese telecom giant Huawei’s CFO Meng Wanzhou on Tuesday, while she awaits a hearing for extradition to the U.S. Her arrest on December 1, during a layover in Canada, heightened trade jitters between the U.S. and China.
Meng was arrested at the request of the U.S. for allegedly violating sanctions against Iran. Beijing threatened “serious consequences” over her detention.
Earlier on Wall Street, stocks initially rose across the board after news emerged that China would cut tariffs on cars made in the U.S. In addition, Chinese Vice Premier Liu He was reportedly in discussion with U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer, with the aim of de-escalating a global trade war.
But some of the initial optimism was dampened after The Washington Post reported the U.S. will condemn China over hacking and economic espionage, potentially ratcheting up tension between the two countries once again.
U.S. stocks also fell after a contentious fight between President Donald Trump and Democratic leadership over border security. Trump threatened to shut down the government if more money was not allocated toward building a wall along the U.S.-Mexico border.
At the end of the trading session, the Dow Jones Industrial Average fell 0.22 percent to 24,370.24, the S&P 500 slipped to close at 2,636.78, and the Nasdaq Composite rose 0.16 percent to 7,031.83.
Over in Europe, sentiment remained relatively fragile amid deepening political turmoil over the U.K. government’s proposed Brexit deal. Prime Minister Theresa May abruptly postponed a parliamentary vote on Monday, sending the sterling down to 20-month lows.
The pound declined further following a tweet from one journalist claiming that May was set to face a leadership challenge from lawmakers within her own party.
The British prime minister has traveled to the Netherlands, Germany and Brussels on Tuesday in an attempt to get a few more concessions from the European side. However, even though the other 27 governments want to help May to get the deal approved in the U.K. parliament, there is no willingness to change the agreement.
The U.S. dollar index, which tracks the greenback against a basket of major currencies, was at 97.417 by mid-day in Asia, rising from 97.219 yesterday.
The Japanese yen traded at 113.46 against the dollar after yesterday’s 113.37, while the Australian dollar inched up to 0.7217 after yesterday’s 0.7206.