Asian shares flirt with four-month highs, yen eases on Kuroda comments

Asian shares hovered near four-month highs on Tuesday as investors took heart from some progress in Sino-US trade talks, while the yen slipped as the Japanese central bank said it won’t rule out further policy easing.

Spreadbetters pointed to a positive start for Europe while E-mini futures for the S&P 500 and the Dow were a shade weaker.

In Asia, Japan’s Nikkei nudged up 0.2 per cent after holding flat for most of the day. Australian shares climbed 0.3 per cent to a 4-1/2 month peak, after gaining over 8 per cent so far this year partly on expectations the central bank could ease policy to temper pressure on growth.

Chinese shares skidded into the red after surging in the previous session, with the blue-chip index off 0.4 per cent.

That left MSCI’s broadest index of Asia-Pacific shares outside Japan down 0.1 per cent, but still close to four-month highs reached last Wednesday.

Trade talks dominated headlines with a new round of negotiations between the United States and China expected in Washington on Tuesday, and follow-up sessions at a higher level later in the week.

Reports of progress in the talks have kindled hopes among investors that the two countries can reach a compromise in their trade war by a March 1 deadline, although few details from the talks have emerged.

President Donald Trump said last week he might extend the March 1 deadline, which would stop an immediate increase in tariffs on $200 billion worth of Chinese imports to 25 per cent from 10 per cent.

Reflecting changing sentiment, Chinese shares have risen rapidly so far this month, with MSCI’s China A shares index up 6.5 per cent, by far the best performance among major markets despite China’s weakening economy.

Additionally, investors are now seen returning to riskier asset markets after the US Federal Reserve signaled earlier this year it could halt rate hikes in light of US economic softness.

Comments from European Central Bank’s Olli Rehn on Sunday have fanned speculation the ECB would launch another round of Targeted Long-Term Refinancing Operations (TLTRO) to support bank lending.

And, the Bank of Japan on Tuesday said it was ready to ramp up stimulus if sharp yen rises hurt the economy and derail the path toward achieving its inflation target.

The remarks sent the dollar slightly higher versus the yen. It was last at 110.60 yen after dipping as low as 110.45 earlier in the day.

“In the last week, it seems like global central banks have started a possible process of monetary easing,” Bank of America-Merrill Lynch strategist Ajay Singh Kapur said in a note.

“If so, this would be very positive for Asia/EM stocks,” Kapur added.

“Central bank balance sheets are the most important driver of stock prices, in our view, by lowering risk premia, and cutting off deflation risk.”

In currency markets, the euro was 0.1 per cent weaker at $1.1295, not far from Friday’s three-month low of $1.1234, largely on a run of soft European economic data including Germany’s GDP figures.

Most other currencies were stuck in familiar ranges.

Sterling was 0.2 per cent weaker at $1.2899, with an eye on Brexit talks between Britain and the European Union, while the Australian dollar held at $0.7112, according to Reuters news agency.

The precious metals market was slightly more lively, with palladium surging to a record high of $1,471.0 per ounce as stricter emissions standards are seen increasing demand for the autocatalyst metal.

Gold held around $1,323.66 per ounce after earlier rising to a near 10-month high of $1,327.64.

Oil prices were mixed, with Brent futures off 29 cents at $66.21, not far from Monday’s $66.83 which was the highest since mid-November.

US crude futures added 21 cents to $55.8.