SYDNEY- Asian shares paused near 19-month peaks on Monday ahead of the expected signing on a Sino-US trade deal, though talks on a phase two package are likely to drag on for months.
MSCI’s broadest index of Asia-Pacific shares outside Japan barely budged, having hit the highest since mid-2018 last week.
Japan’s Nikkei was closed for a holiday. It fell sharply early last week when Iran attacked bases hosting US military in Iraq, only to rally almost a thousand points when the two countries stepped back from hostilities.
E-Mini futures for the S&P 500 edged up 0.1 percent, to be just off all-time highs.
The main event of the week will be the signing of the Phase 1 trade deal between the United States and China on Wednesday. The Trump administration has invited at least 200 people to the White House for the ceremony.
“A calmer geopolitical backdrop and the signing of the US China phase one agreement is, on balance, favorable for global growth,” said Joseph Capurso, an FX strategist at CBA.
“However, the 86 page phase one agreement has not yet been made public. There are doubts how comprehensive the deal is, and whether the phase one agreement will be implemented in full by both governments.”
Washington has reserved the right to re impose tariffs if it judges China is not abiding by the deal.
Wall Street had slipped and bonds rallied on Friday when data showed US nonfarm payrolls missed forecasts with a rise of 145,000, while wages and hours worked were soft.
“This is the perfect employment report for the Fed to continue to run the economy ‘hot’, as views on the natural rate of unemployment continue to drop,” said Alan Ruskin, Deutsche Bank’s global head of FX strategy. “This is perfect for risky assets.”
“Low inflation with solid enough growth outside pockets of weakness like manufacturing, will keep carry bid, with euros the favored financing currency,” he added. “Favored carry longs includes TRY, RUB, BRL, INR for now.”
Early Monday, the euro was idling at $1.1117 having edged up from a $1.1083 low on Friday. Support comes in around $1.1060, while the recent peak at $1.1239 marks stiff resistance. – Reuters