Asian share markets fought to keep a global rebound alive on Tuesday after U.S. President Donald Trump seemed to quash hopes of a trade truce with China, clouding what had been a bright start to the week. Moves were generally muted but Japan’s Nikkei (N225) managed to add 0.8 percent and Chinese blue-chips (CSI300) rose 0.4 percent.
MSCI’s broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) dithered either side of flat and was last up 0.2 percent. E-Mini futures for the S&P 500 (ESc1) dipped 0.1 percent and spreadbetters pointed to a subdued start for the major European Bourses.
In an interview with the Wall Street Journal, Trump said he expects to move ahead with raising tariffs on $200 billion in Chinese imports to 25 percent from 10 percent currently. Trump said it was “highly unlikely” he would accept China’s request to hold off on the increase, planned for Jan. 1.
“Trump’s pessimistic view on the chances of a game-changing China trade deal may puncture global equity markets‘ optimistic start to the week,” said Sean Callow, a senior FX analyst at Westpac in Sydney.
“Combined with last week’s harsh report from the U.S. trade representative, investors have only the flimsiest hope that the Trump-Xi meeting in Argentina will amount to more than a hill of soybeans.” That put trade-sensitive currencies, including the Australian dollar , on the defensive, while the dollar lost some ground on the safe haven yen to 113.46 .
The euro edged up a shade to $1.1334 (EUR=) and the dollar dipped to 97.027 (DXY) against a basket of currencies.
Trump’s remarks came just as the mood among investors had shown signs of brightening and Wall Street took heart from an upbeat holiday shopping period. (N) The Dow (DJI) had ended Monday up 1.46 percent, while the S&P 500 (SPX) gained 1.55 percent and the Nasdaq (IXIC) 2.06 percent.
The rally came after the S&P 500 on Friday recorded its lowest close in six months, down more than 10 percent from September’s peaks and back in “correction” territory.
In commodity markets, oil prices laboured with record production by Saudi Arabia. Oil had climbed nearly 3 percent on Monday but that was seen as largely a technical correction after weeks of heavy losses, driven both by oversupply and demand worries.
U.S. crude (CLc1) was off 9 cents at $51.54 a barrel, while Brent (LCOc1) futures inched up 3 cents to $60.51.
Analysts at National Australia Bank noted the 30 percent drop in oil since early October would drag on U.S. inflation in coming months, perhaps offering further reason for the Federal Reserve to go slower on tightening.
“This is a starkly different picture to just a few months ago,” said NAB’s market strategist Tapas Strickland.
“A stable to lower inflation outlook means there is no urgency for the Fed to hike rates,” he added. “An early 2019 pause is thus becoming more probable.”
Ears will thus be pricked for a speech by Fed Vice Chairman Richard Clarida later on Tuesday, ahead of an appearance by Chair Jerome Powell the day after.