Asia Shares Mixed; China CPI Increases; US-China Officials Talk

Asia Pacific shares were mixed on Wednesday, but most of the majors were up as investors prepared for remarks from U.S. Federal Reserve Chairman Jerome Powell for possible clues on the central bank’s next move on interest rates. Investors showed little reaction to the release of Chinese inflation data that was mostly in line with expectations.

At 07:42 GMT, Japan’s Nikkei 225 Index is trading 21533.48, down 31.67 or -0.15 percent. South Korea’s KOSPI Index is at 2058.78, up 6.75 or +0.33 percent and Hong Kong’s Hang Seng Index is trading 28207.17, up 90.89 or +0.32 percent.

China’s Shanghai Index is at 2915.30, down 12.93 or -0.44 percent and Australia’s S&P/ASX 200 Index is trading 6689.80, up 24.10 or +0.36 percent.

China Consumer Inflation Rises

Early Wednesday, China reported that consumer inflation rose 2.7% year-on-year in June, in line with expectations. Some analysts don’t expect this trend to last in reaction to the prolonged trade dispute between the United States and China.

Analysts also said that inflation was likely supported by a surge in food prices tied to a decline in port supply caused by an outbreak of African swine fever. In June, food prices increased 8.3% year-on-year, higher than the previous month’s figure of 7.7%.

U.S. and China are Speaking

According to reports, top U.S. trade officials spoke with their Chinese counterparts Tuesday as Washington and Beijing work to iron out a trade deal.

CNBC said, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke to Chinese Vice Premier Liu He and Commerce Minister Zhong Shan “to continue negotiations aimed at resolving the outstanding trade disputes” between the world’s two largest economies, according to a U.S. official. The official said “both sides will continue these talks as appropriate.”

China’s Ministry of Commerce confirmed that the call took place in a statement issued Wednesday morning local time.

Kudlow Comments on U.S.-China Trade Relations

On Tuesday, White House top economic advisor, Larry Kudlow, said the Trump administration considers it “very, very important” for Beijing to buy agricultural products while the trade talks are ongoing.

Kudlow also added he would put “no timeline” on the talks and emphasized “quality not speed.”

The price action in the markets suggest trade talks may be taking a backseat to U.S. monetary policy at this time. Furthermore, having been burned in the past, investors may not want to commit to the long side until there is an actual trade deal in place.