Asian Investors More Optimistic About Trade Deal as U.S. Markets Finish Mixed

U.S. stock market investors are also worried about a potential second government shutdown with border policy still the major issue driving a wedge between Democrats and Republicans. Trump tweeted over the weekend, “I actually believe they (Democrats) want a shutdown.”
James Hyerczyk
Global Equity Markets

Shares in Asia are trading mostly higher on Tuesday, bucking the mixed tone on Wall Street as investors remain upbeat following last week’s Lunar New Year. Although U.S. investors expressed uncertainty over geopolitical and economic developments, investors in the main Chinese stock markets, appeared to be slightly optimistic ahead of trade talks between Washington and Beijing.

Early in the session, China’s Shenzhen Component was trading 0.205 percent higher while the Shenzhen Composite was posting a 0.229 percent gain. The Shanghai Composite, however, was under slight pressure.

At 03:24 GMT, Japan’s NIKKEI 225 Index was trading 20723.64, up 390.47 or +1.92%. Hong Kong’s Hang Seng Index was at 28019.32, down 124.52 or -0.44%. South Korean’s KOSPI Index was trading 2184.06, up 3.33 or +0.15%. Finally, in Australia, the S&P/ASX 200 was at 6073.10, up 12.30 or +0.20%.

U.S.-China Trade News Mixed

While the buying in the Asia-Pacific region was mostly higher, the trade on Wall Street on Monday was mixed. The catalyst behind the price action was the lack of conviction by investors who continued to weigh the outcome of the possibility of a trade deal being struck between the United States and China.

Continuing to cast a negative pall on negotiations, which are set to begin later this week in Beijing, were last week’s comments from White House economic advisor Larry Kulow, who said the two parties were still far apart, the delay in the meeting between U.S. President Trump and Chinese President Xi Jinping, and a Wall Street Journal report that said an initial agreement hadn’t even been drawn up yet.

Most of the price action on Monday, regarding U.S.-China trade relations seemed to be fueled by rumor and speculation. For example, Axios reported on Sunday, citing two administration officials, that U.S. President Donald Trump’s advisors have informally discussed holding a summit with Chinese President Xi Jinping next month at the Mar-a-Lago, Trump’s private club in Florida. That meeting could take place as soon as mid-March, the report said.

U.S. Investors Remain Tepid

Monday’s price action in the major U.S. stock indexes suggests investors are lukewarm toward a deal between the U.S. and China taking place within a timely period. Investors are waiting for more information which could create uncertainty that keeps a lid on rallies or drives prices lower. Additionally, bullish investors are not likely to drive prices too far above fair value, while bearish investors would like to see a pullback into a value area, which would be attractive to new buyers.

Since a deal could happen within the next few months, investors may not want to rock the boat too much in either direction, which suggests a sideways trade could develop.

The major U.S. stock indexes finished mixed on Monday. The benchmark S&P 500 Index settled at 2709.80, up 1.92 or +0.07%. The blue chip Dow Jones Industrial Average closed at 25053.11, down 53.22 or -0.22% and the tech-based NASDAQ Composite finished at 7307.91, up 9.71 or +0.14%.

Looming Government Shutdown

U.S. stock market investors are also worried about a potential second government shutdown with border policy still the major issue driving a wedge between Democrats and Republicans. Trump tweeted over the weekend, “I actually believe they (Democrats) want a shutdown.”

However, in late breaking news on Monday, “Congressional negotiators said they reached a tentative deal Monday to fund the government and avoid another shutdown,’ according to CNBC.

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