Asia report: Markets higher as trade tensions ease

Markets in Asia were lifted on Tuesday as fears of a trade war eased, after both Washington and Beijing made conciliatory moves towards negotiation on Monday.

In Japan, the Nikkei 225 surged 2.65% to 21,317.32, as the yen weakened 0.34% against the dollar to last trade at JPY 105.77.

Significant gains were seen on the construction, machinery, and oil and coal sectors on the broader Topix index in Tokyo, which itself was 2.74% higher.

On the mainland, the Shanghai Composite was up 1.04% at 3,166.29, and the smaller, technology-heavy Shenzhen Composite rose 2.2% to 1,829.69.

South Korea’s Kospi was ahead 0.61% at 2,452.06, while the Hang Seng Index in Hong Kong added 0.79% to 30,790.83.

The gains in Seoul came from carmakers and financials, with Hyundai Motor adding 3.01%, offsetting a slide of 0.6% from technology behemoth Samsung Electronics.

Chipmakers were also lower on the Korean peninsula, after a report from the Financial Times that China had offered to purchase more US-made semiconductors in a bid to help lower its trade surplus with the country.

SK Hynix was down 3.1% by the end of the day.

Steelmakers were another group making moves in the country, with Hyundai Steel adding 3.56% and Posco rising 5.34%, while Seah Steel slid 2.54%.

Those movements came after the Korean government confirmed its manufacturers would not face punitive tariffs on exports to the US, but instead would be subject to quotas.

Gains in the region were largely on the back of an easing of concerns of a potential trade war, which had led to a global sell-off last week.

Reports overnight from the Wall Street Journal suggested the US and China were “quietly” negotiating on the trade tension between the two countries.

Chinese Premier Li Keqiang said the two countries should “stick to negotiations” on Monday, while White House trade advisor Peter Navarro said he was “hopeful” Beijing would work work Washington.

Tensions were initially sparked by the implementation of punitive tariffs of up to 25% on steel and aluminium imports to the US by president Trump earlier in the month, before he suggested he was working on other tariffs on up to $60bn of Chinese goods.

Beijing responded to the metals tariffs on Friday, saying it had a list of 128 US-made goods it could target in retaliation.

But concerns weren’t totally relaxed on Tuesday, despite market indicators, with ING chief economist Robert Carnell noting the president’s tough-talk negotiating tactic could backfire on him.

“Before long, someone is going to think that it may be possible to 'game' the U.S. president's announcements and call his bluff.

“This could be on trade issues. It could equally be on foreign policy,” Carnell wrote, adding that it worried him.

Oil prices were higher, with Brent crude last up 0.34% at $70.36 per barrel and West Texas Intermediate ahead 0.37% at $65.79.

In Australia, the S&P/ASX 200 was 0.72% higher at 5,832.30, although gold producers were off 0.62% as investors moved away from the safe-haven metal.

On the geopolitical front in Australia, Canberra said it was expelling two Russian diplomats suspected of spying in solidarity with its allies after the Salisbury nerve agent attack.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 was ahead 0.9% at 8,508.12, led higher by infant food and dairy products exporter Synlait Milk, which surged 6.9%.

Its colleague in the premium dairy products space, which targets China with its New Zealand food products, was also a stellar stock, with A2 Milk rising 3.3%.

In tandem with Australia’s announcement, New Zealand’s government said it was also prepared to expel any Russian spies found on its soil - although it did not have any identified.

Despite its size, it would not be unheard of to find foreign intelligence operatives on New Zealand soil, as the country is an active part of the so-called ‘five eyes’ intelligence alliance between the US, UK, Canada, Australia and itself.

Both of the down under dollars were weaker on the greenback, with the Aussie last off 0.5% at AUD 1.2971 and the Kiwi retreating 0.38% to NZD 1.3754.