Asian shares post modest gains as trade fears keep investors cautious

Published: July 27, 2018 10:15:40 | Updated: July 28, 2018 10:43:53

A woman walks in strong wind caused by Typhoon Lan, past an electronic board showing the graphs of the recent movements of Japan's Nikkei average outside a brokerage in Tokyo, Japan, October 23, 2017. Reuters/Files

Asian stocks struggled to gain traction on Friday, following a mixed Wall Street finish and as the worsening Sino-US trade dispute kept investors in the region cautious, despite signs of rapprochement between the United States and Europe.

MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.1 per cent. The CSI300 of Chinese shares fell 0.5 per cent.

Japan’s Nikkei eked out a 0.1 per cent gain though it was capped by worries that the Bank of Japan could scale down its asset purchase at its upcoming policy review next week.

MSCI’s gauge of stocks across the globe, ACWI, hit four-month highs on Thursday, with European car maker shares gaining 2.6 per cent after the European Union and the United States agreed to negotiate on trade, easing fears of a Transatlantic trade war.

US industrial shares also made gains, rising 0.8 per cent though the S&P 500 Index dipped 0.30 per cent on Thursday, due to a 19 per cent dive in Facebook on its earnings showing slowing usage.

While that pushed down the Nasdaq Composite 1.01 per cent, other US tech firms held firm, with Amazon.com shares gaining 3.2 per cent after market following its stellar earnings.

The 10-year US Treasuries yield edged up to 2.9840 per cent, its highest level in 1-1/2 months, on receding worries about trade tensions.

Yet Asian shares were more subdued as trade disputes between Washington and Beijing have shown few signs of abating.

“Now that Washington does not need to use its energy to fight with Europe, it could increase pressure on China,” said Nobuhiko Kuramochi, chief strategist at Mizuho Securities.

So far this month, MSCI China A shares have fallen 2.6 per cent, taking the biggest hit from US President Donald Trump’s threats on tariffs and other issues among major markets, compared to 3.3 per cent gains in MSCI ACWI.

The Chinese yuan stayed near its 13-month low touched earlier this week.

The offshore yuan traded at 6.8283 per dollar, near Tuesday’s low of 6.8448.

The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, fell to its lowest levels since May last year, having fallen 5.2 per cent from a two year high hit in mid-May.

The euro traded at $1.1641, having fallen 0.73 per cent on Thursday after the European Central Bank signaled no change in its timetable to move away from ultra low rates or end its bond purchase program.

The dollar slipped 0.2 per cent to 110.98 yen as the yen got a lift from rise in Japanese bond yields. The 10-year government bond yield hit one-year high of 0.105 per cent.

In commodities, oil prices extended their recovery, after Saudi Arabia suspended oil shipments through a strait in the Red Sea following an attack on two oil tankers, Reuters reported.

Brent crude futures traded at $74.41 per barrel, down 0.17 per cent, though they were up 1.9 per cent so far this week.

US crude futures were almost flat at $69.55 a barrel.

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