SYDNEY, May 14 2018 : Asian shares shot up to near two-month highs today on signs the United States and China were toning down their trade war rhetoric, while Malaysian Ringgit hit a four-month trough in the first onshore trade since a shock election result last week.
Veteran Mahathir Mohamad came out of political retirement to lead the opposition Pakatan Harapan (Alliance of Hope) to a stunning victory over a ruling party he had once led, defeating prime minister Najib Razak, a former protege he had accused of corruption.
Some investors were concerned that populist promises such as repealing an unpopular goods and services tax and restoring a petrol subsidy could undermine the country’s economic prospects.
In response, the Malaysian Ringgit MYR= fell to a four-month low of 3.982 per dollar at open, while the benchmark share index dropped as much as 2.7 percent at open before bouncing into positive territory.
MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 0.4 percent, to near two-month highs.
Investors cheered as U.S. President Donald Trump pledged to help Chinese telecom company ZTE Corp (000063.SZ) (0763.HK) to “get back into business, fast”, news that JPMorgan analysts said was “a significant positive.”
But Trump held out a helping hand yesterday as he tweeted that he and Chinese President Xi Jinping are working together on a solution for ZTE.
Separately, U.S. officials are preparing for talks in Washington with China’s top trade official Liu He to resolve an escalating trade dispute.
“The fact Trump is now…working to find a resolution for ZTE marks the latest sign of thawing in Beijing-Washington relations,” JPMorgan said in a note.
“This suggests that Trump might see the chance for real progress on trade talks, and is softening the U.S. position on an issue important to China,” it added.
North Korean leader Kim Jong Un has scheduled the dismantlement of the country’s nuclear bomb test site for next week, ahead of his June 12 meeting with Trump in Singapore.
The United States has said it will lift sanctions on Pyongyang if North Korea agrees to completely dismantle its nuclear weapons program.
Strong corporate earnings in the current reporting season along with expectations the U.S. Federal Reserve will hike rates at a slower pace have also bolstered market sentiment in recent sessions.
While tensions in the Korean peninsula have eased, U.S. plans to reintroduce sanctions against Iran have stoked anxiety in the Middle East.
Iran pumps about 4 percent of the world’s oil, and the latest development has sent oil prices near multi-year highs.
Today, U.S. crude dipped 13 cents to $70.56 abarrel and Brent was off 20 cents at $76.92 as a relentless rise in U.S. drilling activity pointed to increased output.
The United States threatened yesterday to impose sanctions on European companies that do business with Iran, as the remaining participants in the Iran nuclear accord stiffened their resolve to keep that agreement operational.
In currencies, the dollar dipped 0.1 percent to 92.41 against a basket of major currencies and was set for its fourth straight day of losses.
Against the Japanese yen JPY=, it ticked down to 109.25 per dollar, remaining largely in a holding pattern since late last month.
The euro EUR= inched 0.16 percent up to $1.1961 following two consecutive sessions of gains as Italy’s anti-establishment parties looked likely to form the next government.
Last week, the Bank of England held rates steady and NewZealand’s central bank said the official cash rate will remain at historic lows of 1.75 percent for “some time.”
Spot gold was up 0.2 percent at $1,320.06 an ounce, after eking out a small weekly gain last week. – Reuters