Asia Pacific Shares Jump Amid Easing Fears of Global Recession

Buyers are responding to a recovery in U.S. Treasury yields, which may be serving as a sign that talk of a U.S. recession may have been overblown.
James Hyerczyk
Asian Stock Indexes

The major Asia Pacific stock indexes are trading higher across the board on Monday. Buyers are responding to a recovery in U.S. Treasury yields, which may be serving as a sign that talk of a U.S. recession may have been overblown. If you recall, stock market investors hit the panic button early last week when the 2-year and 10-year U.S. Treasury note yields inverted.

To some, this inversion signaled a future U.S. recession, but smart money knew the research on this indicator was sketchy due to an average 22 month lag between the signal and actual recession. Furthermore, the stock market tends to rally for about 18 months after the signal is given.

Worries over a U.S. recession also eased when President Trump announced he was delaying some of the tariffs on Chinese goods until mid-December. Additionally, better-than-expected U.S. July Retail Sales report signaled economic growth was still trending higher because of strong consumer spending.

At 06:53 GMT, Japan’s Nikkei 225 Index is trading 20563.16, up 144.35 or +0.71%. Hong Kong’s Hang Seng Index continued to mount a spectacular recovery. It is trading at 26317.35, up 583.13 or +2.27% and South Korea’s KOSPI is at 1939.90, up 12.73 or +0.66%.

In China, the Shanghai Index is trading 2879.53, up 55.71 or +1.97% and Australia’s S&P/ASX 200 closed at 6467.40, up 61.90 or +0.97%.

U.S.-China Trade Relations

There were no U.S.-China trade war developments over the week-end. Early last week, U.S. Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin and top Chinese Liu He agreed to pick up negotiations by phone within two weeks, according to a statement from the Chinese Commerce Ministry. There was no mention of whether negotiators would meet in person next month in Washington as previously scheduled.

In his comments to reporters, President Trump said his negotiators had a positive call with their Chinese counterparts, and that “they would really like to make a deal.”

Later in the week, the Asian stock markets rallied sharply higher after the top U.S. trade negotiator said that new tariffs on Chinese-made consumer goods including cell phones, toys and video game consoles would be delayed until December 15. Trump said the move was designed in part to avoid any pain for consumers heading into the holiday season.

On Thursday, China announced that it would take “necessary countermeasures” if President Trump moves forward with tariffs set to take effect September 1, continuing the back-and-forth escalation of the trade war even as the conflict elevates fears of a global economic slowdown.

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