Asia report: Markets mixed as US and China reach trade deal

Markets in Asia were mixed on Monday, as investors digested positive industrial data from China, and as officials in that country fiinally agreed with their US counterparts on a first phase trade deal.

In Japan, the Nikkei 225 was down 0.29% at 23,952.35, as the yen weakened 0.05% against the dollar to last trade at JPY 109.43.

Technology conglomerate SoftBank Group was 1.55% firmer, while among the other major components on the benchmark index, Fanuc was down 1.12% and Fast Retailing lost 0.43%.

Carmakers were also in the red, paring back the gains they made at the end of last week amid renewed Brexit optimism, with Toyota Motor down 0.33% and Nissan Motor 0.37% weaker.

The broader Topix index was off 0.18% by the end of trading, to finish the session in Tokyo at 1,736.87.

On the mainland, the Shanghai Composite was 0.56% firmer at 2,984.15, and the smaller, technology-heavy Shenzhen Composite leapt 1.56% to 1,686.41.

In fresh official data out of Beijing, China’s industrial production was up 6.2% year-on-year in November.

Those numbers from the National Bureau of Statistics were well ahead of forecasts for a 5% improvement according to a Reuters poll.

At the same time, retail sales were up 8% year-on-year for the month, which was also well ahead of expectations for growth of 7.6%.

South Korea’s Kospi was 0.1% weaker at 2,168.15, while the Hang Seng Index in Hong Kong slid 0.65% to settle at 27,508.09.

The blue-chip technology stocks were mixed in Seoul, with Samsung Electronics flat, while chipmaker SK Hynix rose 0.8%.

The main news of the day was the fact that the United States and China had finally put aside their long-running differences to reach a first phase agreement on trade.

US Trade Representative Robert Lighthizer said over the weekend that a deal was “totally done”, adding that it would see US exports to China almost double over the next two years.

Officials from both countries confirmed the agreement on Friday - the first solid development in the tit-for-tat trade war of punitive tariffs that has been running for around 18 months.

It meant that a fresh round of charges, planned by Washington to be levelled on Chinese goods from Sunday, was cancelled.

“With two major tail risks in the rear view mirror, with a US, China phase one trade deal apparently completed, and UK politics in a more stable place than it has been in three years, investors are taking their cues from much better than expected Chinese retail sales and industrial production data for November, and embarking on a bit of pre-Christmas shopping,” said CMC Markets analyst Michael Hewson.

Spreadex analyst Connor Campbell struck a more cautious note, however, noting that the deal had not even finished being translated.

“Which means, despite US trade representative Robert Lighthizer insisting that it is ‘totally done’, there will be some routine ‘scrubs’ to the text - not the most reassuring state of affairs given how quick to anger both sides are.

“The US agreed to one of China’s key red lines, i.e. rolling back pre-existing tariffs.

“However, that reversal has been described as ‘minimal’ - 25% tariffs will be maintained on around $250bn in goods, while only $120bn will see the charges reduced to 7.5%.”

Oil prices were mixed at the end of the Asian day, with Brent crude last up 0.14% at $65.31 per barrel, while West Texas Intermediate lost 0.05% to $60.04.

In Australia, the S&P/ASX 200 surged 1.63% to close the end of its trading day at 6,849.70.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 was down 0.1% at 11,226.83, at the end of a truncated session as the Wellington bourse suffered technical issues late in the afternoon.

“Following today’s network connectivity issue and consultation with cash market trading participants, NZX has determined not to reopen the cash markets for trading today,” the exchange operator said in a statement when it halted trading early.

Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.12% at AUD 1.4527, and the Kiwi advancing 0.24% to NZD 1.5130.