Asian Markets Mixed as Optimism Over US-China Trade Deal Fades

Asia Pacific shares finished mixed on Thursday as bullish investors paired gains and safe-haven demand rose slightly as optimism for a quick resolution to the U.S.-China trade dispute faded.

Asian shares moved higher early in the session, encouraged by comments from U.S. President Donald Trump who said on Wednesday a deal to end a nearly 15-month trade war with China “could happen sooner” than people think.

Japan’s Nikkei 225 Index settled at 22048.24, up 28.09 or +0.13%. Hong Kong’s Hang Seng Index finished at 26041.93, up 96.58,up 0.37% and South Korea’s KOSPI Index closed at 2074.52, up 1.13 or +0.05%.

China’s Shanghai Index settled at 2929.09, down 26.34 or -0.89% and Australia’s S&P/ASX 200 Index finished at 6677.60, down 32.60 or -0.49%.

Positive Mood over China Fades

The positive mood faded and Chinese shares plunged as Trump’s repeated mixed messages about trade negotiations caused investors to curb their enthusiasm.

Treasury yields fell, gold rose and the Japanese Yen increased on Thursday in a sign that some investors preferred safe assets given lingering risks posed by trade friction and political uncertainty.

Trump’s comments from Tuesday that he is willing to walk away from a “bad deal” also continued to dampen bullish sentiment.

“Trump is genuinely interested in reaching a trade agreement in China, but he also trusts his advisors and when they tell him what the Chinese are bringing to the table is insufficient, or has been dramatically altered at the last minute,” Jeff M. Smith, Research Fellow at the South Asia-Heritage Foundation, said in the Global Markets Forum chatroom, “He’s proven more than willing to walk away from a bad deal.”

US-Japan Sign Limited Trade Deal

President Trump and Japanese Prime Minister Shinzo Abe signed a limited trade deal on Wednesday that cuts tariffs on U.S. farm goods, Japanese machine tools and other products while further staving off the threat of higher U.S. car duties.

Japanese shares initially got a boost from the agreement but turned lower in a volatile trade as investors squared positions before going ex-dividend from Friday.

Investors Shrug off Impeachment Inquiry on Trump

In the U.S. on Wednesday and Asia on Thursday, investors largely shrugged off the Democrats’ decision to begin an impeachment inquiry into Trump. The move came as a summary of a telephone call showed the U.S. president had asked Ukraine’s president to investigate a political rival.