December 05, 2019: Asian markets swung back to a rally Thursday on renewed hopes for the China-US trade talks after a report said a deal could be finalised by the end of next week.
The story came a day after Donald Trump had poured freezing water on the prospects for an agreement by suggesting he would be happy waiting until after the 2020 presidential election before signing off on one.
It also provided a much-needed boost to investors following disappointing US data on jobs and the key services sector.
Bloomberg News reported that US negotiators expected a deal to be completed before a new round of US tariffs on China is due to hit on December 15.
It quoted unnamed sources as saying Trump's comments that he had no deadline and “in some ways, I like the idea of waiting until after the election” should not have been taken as a sign the talks had stalled.
Markets globally turned south following the remarks, with observers suggesting US bills supporting Hong Kong protesters and minority Uighurs in China had also dented the chances of a pact being signed.
AxiTrader's Stephen Innes said weak US data played an important role in Trump's thinking regarding the trade talks.
“These are critical chunks of the economy the president must defend, but the more vulnerable data also provides inferior optics for his election 2020 campaign,” he wrote in a note.
“If these gloomy forward economic gauges start to leak into the consumption and/or employment sectors, one would have to assume that President Trump, from a purely economic perspective, would be as motivated as (Xi Jinping) to table a trade deal sooner than later”, he said.
– 'Walking up a down elevator' – However, he added that “it really feels like we're always walking up a down (escalator) when it comes to navigating these never-ending US-China hostilities”.
Hong Kong and Shanghai each rose 0.6 percent in the morning, Tokyo went into the break 0.7 percent higher, Sydney put on one percent and Singapore was 0.5 percent higher.
Wellington, Taipei and Jakarta also posted gains, though Seoul was flat.
On the outlook for markets, National Australia Bank's Ray Attrill said it was significant that the US side was now talking about removing tariffs.
“To date, it has only been the Chinese side who have been talking about a tariff rollback as likely to form part of any phase-one trade agreement. Here the US side is acknowledging that this is on the table,” he said.
And Kristina Hooper, chief global market strategist at Invesco, told Bloomberg TV: “If we do just muddle along and there aren't the tariff increases on December 15, we'll probably see something of a stable stock market environment.” However, any negative news “could be the spoiler for what otherwise would be a fairly solid month for stocks”.
Oil prices saw a small retreat a day after enjoying a surge on reports that OPEC and other major producers were ready to announce fresh output cuts.
Fresh trade deal hopes and US figures showing a drop in stockpiles, pointing to improved demand, also provided a bump to the commodity.
The pound held around its highest levels against the euro since May 2017 after fresh polls indicated Prime Minister Boris Johnson's Conservatives would win a majority at next week's general election, giving him a mandate to push through his Brexit deal and avert a no-deal divorce.