Asian shares struggle near eight-month highs on trade jitters

SYDNEY - 4 April 2019: Asian shares stepped back from eight-month highs on Thursday as investors took money off the table amid fresh concerns about the ongoing Sino-U.S. trade talks and their impact on the prospects for world growth.

Spreadbetters pointed to a subdued start for European shares with futures for London’s FTSE off 0.3 percent while those of Germany’s Dax and Eurostoxx each fell 0.1 percent. E-minis for the S&P 500 were a shade weaker.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.4 percent after five straight days of gains took it to the highest since late August. Losses were led by Australia and New Zealand while Hong Kong, Philippines and Indian markets were also in red.

Chinese shares were firmer with the blue-chip index up 0.6 percent while Japan’s Nikkei paused near a recent one-month top.

Analysts pointed to investor fatigue and a lack of fresh headlines on the Sino-U.S. trade talks for Thursday’s sell-off while disappointing U.S. economic data this week also hung heavy on sentiment.

“It would take some significant breakthrough, such as a total removal of tariffs implemented last year, to give the markets fresh momentum,” said J.P. Morgan Asset Management Asia Pacific Chief Market Strategist Tai Hui.

Risk sentiment has otherwise been supported this week by signs of progress in Sino-U.S. trade talks. White House economic adviser Larry Kudlow said on Wednesday the two sides aimed to bridge differences during talks, which could extend beyond three days this week.

Investors are keen to see if ongoing talks lead to an earlier-than-anticipated meeting between U.S. President Donald Trump and his Chinese counterpart Xi Jinping to sign an accord.

“Also an important question would be whether an agreement would be sufficient to revive business sentiment and the global trade cycle,” JPMorgan’s Tai added.

“We believe on the margin it would help, but practically all investors we’ve spoken to in Asia in the past six months believe friction will still flare up from time to time between the two sides.”

Bloomberg reported on Thursday the U.S. wanted to set a 2025 target for China to meet trade pledges.

The plan would see China committing to buy more U.S. commodities, including soybeans and energy products, and allow full foreign ownership for U.S. companies operating in China as a binding pledge.

Traders were also squaring off positions ahead of U.S. jobs data due on Friday after earlier disappointments this week. Wednesday’s figures showed services sector activity hit a more than 19-month low in March while private payrolls grew less than expected, hinting at softness in the world’s largest economy.

In the foreign exchange market, moves were modest after bigger swings overnight when all major currencies gained against the safe-haven yen.

On Thursday, the greenback was a tad lower against a basket of currencies at 97.06 although it nudged up against the yen.

The euro was 0.1 percent higher at $1.1246 while sterling gained to $1.3185 after British Prime Minister Theresa May held talks with the opposition Labour party in a bid to break the Brexit deadlock that may lead to a softer departure deal with the EU.

The lower house of Britain’s parliament late on Wednesday also narrowly passed legislation which would force May to seek a delay to Brexit in order to prevent the risk of leaving without a deal on April 12.

In commodity markets, spot gold nudged up to $1,292.96 per ounce.

U.S. crude eased 9 cents to $62.37 while Brent crude rose 4 cents to $69.27.