Asia stocks encouraged by bounce in S&P futures; confused on Syria

Asian shares edged higher on Monday as a bounce in US stock futures soothed sentiment even as US President Donald Trump kept up his twitter war with China over trade just a couple of days before President Xi Jinping gives a keynote speech.

There was also little immediate reaction to reports US forces had struck at sites in Syria, presumably in retaliation for an alleged chemical attack on civilians there.

Trump said on Sunday there would be a “big price to pay” after medical aid groups reported dozens of people were killed by poison gas in a besieged rebel-held town.

Yet the Wall Street Journal reported Pentagon officials had denied the reports of US strikes, leaving markets confused.

For now, investors in Asia were encouraged that E-Mini futures for the S&P 500 were still up 0.4 per cent, while NASDAQ futures rose 0.6 per cent.

MSCI’s broadest index of Asia-Pacific shares outside Japan inched up 0.1 per cent. Japan’s Nikkei wavered either side of flat, and South Korea edged ahead by 0.2 per cent.

Caution remained the watchword after Trump claimed on Sunday that China would take down its trade barriers because it was “the right thing to do.”

Trump late Thursday threatened to slap $100 billion more in tariffs on Chinese imports, while Beijing said it was fully prepared to respond with a “fierce counter strike”.

Analysts warned the drama would be a long-running one given the lengthy public discussion period on US tariff proposals meant the earliest they might be imposed was somewhere around late July or early August.

“This is not going to happen tomorrow, and given the mercurial nature of the US administration, the whole issue could well disappear before anything really happens,” said Marshall Gittler, chief strategist at ACLS Global.

“Many market participants may be starting to think that this is just a lot of sound and fury, signifying nothing in the end. But..you never know, US trade policy is in the hands of someone totally unpredictable.”

Hopes for earnings

The next major hurdle will be a speech by Chinese President Xi at the Boao Forum on Tuesday.

The war of words took a toll on Wall Street on Friday. The Dow ended down 2.3 per cent, while the S&P 500 lost 2.2 per cent and the Nasdaq 2.3 per cent.

The looming earnings season might be strong enough to provide fundamental support for stocks, with analysts tipping the fastest quarterly profit growth in seven years.

The latest souring of risk sentiment and a soft report on US payrolls helped sovereign debt end last week on a firm note. Yields on US 10-year Treasury debt dropped back to 2.786 per cent, from a top of 2.8380 on Thursday.

In currency markets, the dollar steadied on the safe haven yen at 106.87, just short of the recent six-week peak of 107.49. The euro hovered at $1.2274, after bouncing from a trough of $1.2212, while the dollar index was a fraction firmer at 90.150.

According to Reuters, in commodity markets, gold eased slightly to $1,331.90 an ounce, but stayed well within recent trading ranges.

Oil prices edged up in early trade with Brent crude futures for June rising 16 cents to $67.27 a barrel, while US crude rose 11 cents to $62.17 a barrel.