Asian share markets inched cautiously higher on Monday as investors anticipated developments on proposed China-US trade talks. Meanwhile, the Chinese yuan rallied away from dangerous lows.
MSCI’s broadest index of Asia-Pacific shares excluding Japan increased 0.4 percent, while Shanghai blue chips steadied 0.2 percent.
Moves were slight in Japan, with the Nikkei off 0.3 percent in thin trade, while the S&P 500 e-minis edged up 0.05 percent.
The yuan hit its highest in a week at 6.8512 per dollar, with Beijing acting to prevent a test of the psychological barrier 7.0000 level.
Investors were also pushed news that China and the United States will hold lower-level trade talks this month, offering hope that they might resolve an escalating trade war.
Reports indicated that talks with Washington would roll on August 21 and 22, just prior to US tariffs on $16 billion of Chinese goods take effect.
The US Trade Representative’s office stated on Friday that it doubled the length of tariff hearings on the next $200 billion worth of Chinese goods to six days from the previously planned three due to the tremendous demand from companies to testify.
The hearings will take place from August 20 to 24, and on August 27.
Dealers referred to some speculations that the talks could set the stage for a summit between US President Donald Trump and Chinese President Xi Jinping in November.
“Although such a timeline for agreement is totally unrealistic given how far apart the two sides are, the positive headlines should help sentiment to improve and a positioning unwind of USD possible,” stated analysts from JPMorgan. “This would set EM Asia equities up for a short term squeeze, with HK/China yuan sensitives likely leading the way higher.”
What was helping the general mood was the firming Turkish lira, which was steady around 6.0000 per dollar on Monday.
Qatar and Turkey’s central banks have signed a currency swap in order to provide liquidity and support for financial stability, Qatar’s central bank disclosed on Sunday.
“Sentiment toward Turkey has stabilized, but medium-term vulnerabilities remain substantial and markets continue to penalize currencies with weak fundamentals,” warned Michael Gapen, who is a Barclays economist.
“But we see contagion risk from Turkey as a relatively low-risk outcome. History indicates emerging market volatility is unlikely to knock the US economy, or the Fed, off course,” he added.
Minutes of the Federal Reserve’s August policy meeting are set to be released on Wednesday. It is expected to show that policy makers are upbeat on the economy and committed to further gradual rate hikes.