Asian shares advance after Trump delays tariffs: markets wrap

Asian shares climbed and US futures advanced as markets turned risk-on after President Donald Trump delayed tariffs on Mexico and Canada for a month and said he’d hold further talks with China.

Stocks across Asia-Pacific rebounded after the S&P 500 trimmed most of its slide on Monday. The optimism was reflected in gains in Chinese stocks listed in Hong Kong, which jumped almost 4 per cent.

Currency markets though were more concerned that US-China talks will fail to avert tariffs being levied with traders bidding up the dollar against its Group-of-10 peers.

The tariff delays helped reverse Monday’s risk-off market sentiment with investors turning their focus on how a planned call between the US and China pans out.

The deferment with Mexico and Canada bolsters the view that Trump sees tariffs as a negotiating ploy — but is still reluctant to inflict economic pain on Americans. 

The positioning in Chinese equity market and a lot of other Asian markets is “a lot lighter today compared to 2018 when we first had the US-China trade escalation,” said Kelvin Tay, a regional CIO at UBS Global Wealth Management, in a Bloomberg TV interview.

“I think this time around the markets are likely to be to be a little bit orderly and not as chaotic as before.” 

Trump said that his administration plans to speak with China, raising the possibility of a potential reprieve on a 10 per cent levy.

China will be subject to 10 per cent tariffs if no deal is reached by 12:01 am Tuesday New York time. 

“China now heads to the negotiating table with Trump, and with Mexico and Canada successfully delaying tariffs, hopes are high that China can do the same as well,” wrote Jun Rong Yeap, strategist at IG Asia Pte in a note. “But if China can pull it off, risk sentiments may find further recovery momentum, at least in the near term.”

Protectionism

Trump’s move to invoke an emergency and impose tariffs on the two nations and China is the most extensive act of protectionism taken by a US president in almost a century.

“Chinese tariffs seem much more likely to be implemented due to economic security, national security, and Cold War Two concerns,” wrote Jason Schenker president of Prestige Economics in a note. 

Among the biggest uncertainties is how a resilient US economy would handle the impact of a trade war, in case it materialises.

That concern was evident in the bond market, where two-year Treasury yields climbed as longer ones moved in the opposite direction. 

“While we believe that tariffs are primarily a negotiating tool for President Trump, it’s very difficult to say whether these tariffs will be short-lived or if there is a scenario where a deal is struck that reduces the tariffs,” said Yung-Yu Ma at BMO Wealth Management. 

Uncertainty

Federal Reserve Bank of Chicago President Austan Goolsbee said the central bank should proceed more cautiously in lowering borrowing costs amid mounting uncertainty introduced by the Trump administration.

Others such as the Fed’s Raphael Bostic, Mary Daly, and Philip Jefferson are set to speak later today. 

In other markets Tuesday, the dollar strengthened against every Group-of-10 peer. West Texas Intermediate oil fell early in Tuesday’s session after its biggest advance in more than two weeks.

Gold held on to gains. Four of the five major cryptocurrencies rose on Monday after some concerns over Trump’s moves subsided. 

Key events this week:

• US factory orders, US durable goods, Tuesday

• Alphabet earnings, Tuesday

• Fed’s Raphael Bostic, Mary Daly, Philip Jefferson speak, Tuesday

• China Caixin services PMI, Wednesday

• Eurozone HCOB Services PMI, PPI, Wednesday

• US trade, Wednesday

• Fed’s Austan Goolsbee, Tom Barkin, Michelle Bowman, Philip Jefferson speak, Wednesday

• Eurozone retail sales, Thursday

• UK rate decision, Thursday

• US initial jobless claims, Thursday

• Fed’s Christopher Waller, Lorie Logan speak, Thursday

• Amazon earnings, Thursday

• US nonfarm payrolls, unemployment, University of Michigan consumer sentiment, Friday

• Fed’s Michelle Bowman, Adriana Kugler speak, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.2% as of 12:38 p.m. Tokyo time

• Japan’s Topix rose 1.1%

• Australia’s S&P/ASX 200 rose 0.3%

• Hong Kong’s Hang Seng rose 2.4%

• Euro Stoxx 50 futures rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%

• The euro fell 0.3% to $1.0317

• The Japanese yen fell 0.3% to 155.20 per dollar

• The offshore yuan was little changed at 7.3075 per dollar

Cryptocurrencies

• Bitcoin fell 1.2% to $100,715.57

• Ether fell 0.5% to $2,803.38

Bonds

• The yield on 10-year Treasuries advanced one basis point to 4.57%

• Japan’s 10-year yield advanced two basis points to 1.265%

• Australia’s 10-year yield advanced five basis points to 4.43%

Commodities

• West Texas Intermediate crude fell 1.1% to $72.39 a barrel

• Spot gold rose 0.2% to $2,820.93 an ounce