Asian stock markets ticked higher last Monday based on assumptions that leaders from the U.S. and China would finally be able to resume trade talks this week. Meanwhile, oil prices soared as political tensions tighten between Washington and Tehran.
European markets are slated to trade relatively higher, as the pan-region Euro Stoxx 50 futures notched 0.2% increase, FTSE futures on London increased 0.1% in opening trade, while the futures of German DAX stays flat.
In Asia, MSCI’s widest index of shares in the Asia-Pacific outside Japan obtained a 0.2% increase, hanging not far behind from six-week high recorded last Thursday, on the other hand, Nikker average of Japan ticked 0.1% higher.
In China, the blue-chip CSI 300, Hong Kong’s Hang Seng and the Shanghai Composite, all remained flat.
Shares of Wall Street ended a bit lower last Friday after acquiring a record high following the Federal Reserve’s hints the previous week that it may slice interest rates shortly to boost the economy of the U.S. from prolonged trade issues.
Investors are anxiously waiting for an anticipated meeting between China’s Xi Jinping and President Donald Trump later this week for any signal of downsurge in trade conflicts that are causing damage to the worldwide economy and affecting business confidence. The leaders are planned to meet during the G20 summit, which will be held in Japan.
Vie Commerce Minister Wang Shouwen stressed last Monday that the United States and China must be willing to make settlements in trade talks and not only demand on what each country wants.
Last Friday, Mike Pence, U.S. Vice President, decided to put off a speech that was meant to criticize China’s human rights record. This action increased hopes for the upcoming trade talks. In October, Pence went after the Chinese government with a powerful speech in which he made an array of complaints from state surveillance to human-rights violations.
Norihiro Fujito, Mitsubishi UFJ Morgan Stanley Securities (MUMSS) ’s chief investment strategist, said that event-driven players are purchasing back stocks like China and the United States at least seems to be negotiating with each other.
However, the majority of analysts are skeptical that the two countries will reach any significant agreement as the feud has gone beyond tariffs, especially after Washington placed, Huawei, the world’s largest telecoms gear producer, on a blacklist that prohibits U.S. companies from engaging in any business with the company.
Senior strategist for the Asia Pacific at Rabobank, Michael Every, said in a note last Monday that the best thing markets can wish for “is a more patient delay and position building at the G20 that at least sees the U.S. and China refrain from any further escalation.”
The U.S. Commerce Department noted last Friday that it would be adding certain Chinese companies plus a government-owned institute linked in supercomputing with applications in the military to its national security “entity list” that will ban them from purchasing U.S. components and parts without the government’s consent.
In China, the world-renowned newspaper Global Times reported that FedEx Corp would most probably be joining the ‘unreliable entities list’ of Beijing.
MUMSS’s Fujito said that few investors could anticipate pronounced addition in the entity lists, only a few days before a possible summit and stressing that markets could go back to disappointments after the talks.
Oil prices surged as feud stayed high between Washington and Tehran succeeding Iran’s shooting incident of an unmanned surveillance drone of the U.S. military. Mike Pompeo, U.S. Secretary of State, said that a “significant” penalty on Tehran would be declared.
Brent crude futures increased 0.7% costing $65.66 per barrel, close to Friday’s three-week high at $65.76. On the other hand, U.S. crude futures soared 1.1% costing $58.07 per barrel, the highest it recorded in the past three weeks.
Another factor potentially affecting it is the Arab commentators and politicians entertaining Trump’s economic vision in the Middle East amount $50 billion with a blend of exasperation and derision, although few in the Gulf asked for it to be considered.
The mixture of intensified geopolitical issues and the likelihood of interest rates in the U.S. being cut is enticing investors to look for the safety of gold. The valuable metal is priced at $1,404.79 per ounce, close to Friday’s six-year high costing at $1,410.78/oz.
In the foreign exchange market, the euro soared to $1.1386 last Monday; its three-month high against the dollar as bullish bets on the dollar stay solid on anticipation of an interest rate cut by the Federal Reserve.
The dollar toppled 107.42 yen, having plunged to as little as 107.045 last Friday, the lowest level it registered since its flash crash last January 3.
Other remarkable gainers include the Australian dollar, which notched almost 0.5% to $0.6958. The Turkish lira was up by 1.4% to 5.7219 each dollar. Lastly, Bitcoin soared overnight to $11,247.62, the highest level it had since March 2018.