Asia report: Markets head higher amid renewed trade optimism

Most markets in Asia finished higher on Monday, with Chinese bourses heading higher amid renewed optimism on the US-China trade front.

In Japan, the Nikkei 225 was 0.3% higher at 22,867.27, as the yen weakened 0.06% against the dollar to last trade at JPY 108.74.

Of the major components on the benchmark index, automation specialist Fanuc was up 2.05% and fashion firm Fast Retailing added 0.28%, while technology conglomerate SoftBank Group slipped 0.52%.

The broader Topix index was largely flat by the end of the day in Tokyo, losing just 0.0006% to close at 1,648.43.

On the mainland, the Shanghai Composite rose 0.85% to 2,980.05, and the smaller, technology-heavy Shenzhen Composite leapt 1.53% to finish at 1,657.38.

South Korea’s Kospi was ahead 0.27% at 2,093.60, while the Hang Seng Index in Hong Kong was 0.84% firmer at 26,891.26.

The blue-chip technology stocks were mixed in Seoul, with Samsung Electronics up 0.79% and chipmaker SK Hynix finishing flat.

Banking giant HSBC was down 2.27% in Hong Kong trading, after the company reported an 18% fall in third quarter pre-tax profits to $4.8bn.

It remained upbeat on its Asia prospects, however, with HSBC reporting a 4% improvement in pre-tax profits in the region year-on-year, and adding that it saw a “resilient performance” in protest-hit Hong Kong.

Insurance group AIA was up 3.68% after it also posted its latest numbers on Monday, reporting a 1% rise in its value of new business to $980m for the three months ended 30 September.

AIA also spoke of the ongoing situation in Hong Kong, telling shareholders that it had been affected by a “challenging operating environment, particularly in relation to current events” in the special administrative region.

In economic news out of the city, Hong Kong’s financial secretary Paul Chan wrote in a blog post on Sunday that its economy was now in recession, reporting that preliminary estimates for third quarter growth - set to be released on Thursday - would show two consecutive quarters of contraction.

Chan said it would be “extremely difficult” for Hong Kong to achieve the initial official forecasts for annual growth of between 0% and 1%, which were made before the protests began in June.

On the US-China trade front, optimism was the theme of the day after the Office of the US Trade Representative said that the two economic superpowers had “made headway on specific issues” on Friday, adding that “the two sides are close to finalising some sections of the agreement”.

Following that, China’s Ministry of Commerce said on Saturday that both sides had now agreed to address core issues, reporting that the US would begin importing cooked poultry from China, and Beijing would rescind its ban on poultry imports from the US.

The developments came after US President Donald Trump announced earlier in October that the two sides had reached a “very substantial phase one deal” ahead of Washington’s next planned round of punitive tariffs on Chinese imports.

Still, the ongoing trade war was having an effect on China’s economy, with the National Bureau of Statistics reporting that industrial sector profits were down 5.3% year-on-year in September, in a release on Sunday.

“It’s been a tranquil start to a potentially eventful week,” noted AxiTrader Asia Pacific market strategist Stephen Innes.

“Behind doom and gloom, however, short-term investors are smelling a reversal in risk sentiment as even a mini US-China trade deal together with the removal of the no-deal Brexit risk could trigger a decisive turn in sentiment.”

Oil prices were lower as the region went to bed, with Brent crude last down 0.41% at $61.77 per barrel, and West Texas Intermediate falling 0.43% to $56.42.

In Australia, the S&P/ASX 200 eked out gains of 0.02% to close its trading day at 6,740.70, with the major miners among the main risers.

BHP was up 1.12% in Sydney, while Fortescue Metals added 2.15% and Rio Tinto was ahead 0.48%.

Across the Tasman Sea, New Zealand markets were closed for the country’s Labour Day public holiday.

The down under dollars were a mixed picture against the greenback, with the Aussie last 0.05% stronger at AUD 1.4649, while the Kiwi weakened 0.1% to NZD 1.5767.