TOKYO- Asian stocks edged up on signs the United States and China were on track for a preliminary trade deal, though optimism was tempered by the almost daily shifts in prospects for defusing the damaging tariff war now in its second year.
The fluid situation around Sino-US trade negotiations has cast a pall on financial markets heading into Christmas, with major economies grappling under the weight of weak exports, investments and corporate profits.
Investors were quick to latch on to a Bloomberg report on Wednesday that Washington and Beijing are closer to agreeing how many tariffs would be rolled back in a “phase one” trade deal.
US President Donald Trump later said that negotiations with China are going “very well,” providing a boost to riskier assets and denting safe havens like the Japanese yen.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3 percent. Australian shares were up 0.9 percent, while Japan’s Nikkei stock index rose 0.81 percent.
Trump’s comments marked a reversal from Tuesday when he roiled global markets by saying a trade deal may not come until after the 2020 US presidential election.
Analysts warn that more market turbulence is possible given Sino-US negotiations are very fluid.
“We could be in for a bit of a rally in risk assets and risk-on trades,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors in Sydney.
“My base case scenario is the two sides reach some deal. The pressure for a deal is immense simply because of the economic slowdown in both countries. However, we see increased volatility because policy uncertainty has become a constant.”
US stock futures fell 0.03 percent on Thursday in Asia after the S&P 500 gained 0.63 percent on Wednesday.
The United States has imposed tariffs on Chinese goods in a 17-month long dispute over trade practices that the US government says are unfair. China has responded in kind with its own tariffs on US goods.
If both sides cannot reach an agreement soon, the next important date to watch is Dec. 15, when Washington is scheduled to impose even more tariffs on Chinese goods. – Reuters