TOKYO, May 16 2019 : Asian shares steadied today on news that U.S. President Donald Trump is planning to delay tariffs on auto imports, providing much needed relief to markets hit by a flare-up in trade tensions and on weak U.S. and Chinese economic data.
MSCI’s broadest index of Asia-Pacific shares outside Japan was flat, with both Australia and South Korea little changed.
Japan’s Nikkei fell 0.6 per cent, with banks hurt by weak earnings.
On Wednesday, Wall Street shares extended their rebound, with the S&P 500 gaining 0.58 per cent and the MSCI’s broadest gauge of world stocks bouncing back from a two-month low hit on Tuesday.
The uptick came after three administration officials told Reuters yesterday that Trump is expected to delay a decision on tariffs on imported cars and parts by up to six months.
Hyundai Motor jumped more than five per cent but reaction in Japanese carmaker shares was muted.
Also yesterday, less than a week after Washington slapped higher tariffs on $250 billion imports from China, U.S. Treasury Secretary Steven Mnuchin said he will likely travel to Beijing soon to continue negotiations with Chinese counterparts.
The positive trade developments lifted risk sentiment that had been dampened earlier in the session by weak economic data.
China reported surprisingly weaker growth in retail sales and industrial output for April, with overall retail sales posting the slowest increase since May 2003.
That prompted the Atlanta Federal Reserve’s GDPNow forecast model to cut the second-quarter growth estimate to 1.1 per cent from 1.6 per cent estimated on May 9.
Weak data underpinned U.S. bond prices, pushing down their yields further.
The 10-year U.S. Treasuries yield eased to 2.376 per cent, near its 15-month low of 2.340 per cent touched on March 28.
The two-year notes yield hit a 15-month low of 2.139 percent yesterday and last stood at 2.155 per cent.
Fed funds rate futures are fully pricing in a rate cut by the end of this year and more than a 50 percent chance of a move by September.
“The markets are inching step by step in pricing in a rate cut. That is a sea change from a year ago when the consensus was three to four rate hikes a year,” said Akira Takei, bond fund manager at Asset Management One.
Oil prices edged up on the prospect of mounting tensions in the Middle East hitting global supplies despite an unexpected build in U.S. crude inventories.
Brent crude rose 0.7 per cent to $72.25 a barrel, while U.S. West Texas Intermediate (WTI) crude fetched $62.45 a barrel, up 0.7 per cent.
The sabotage of the tankers, for which no one has claimed responsibility, and Saudi Arabia’s announcement on Tuesday that armed drones hit two of its oil pumping stations have raised concerns Washington and Tehran may be inching towards conflict. – Reuters