Asian Shares Weaken as Tariff Rollback Optimism Softens

China’s exports and imports declined in October, Reuters reported citing data from the country’s customs released on Friday. In dollar terms, exports fell 0.9% while imports fell 6.4% from a year ago in October, but beat analysts’ forecasts.
James Hyerczyk
Asian Stocks

The major Asia Pacific shares finished mostly lower on Friday as investors continued to express a tad of uncertainty over how the U.S.-China trade relations will play out even after both economic powerhouses agreed on Thursday to rollback tariffs.

Playing on the minds of traders continues to be the timing and the location of the venue of the signing of “Phase One” of the partial trade deal. However, there are now worries that the easing of tariffs is not sitting well with some members of Trump’s administration. Their fear is that the U.S. will lose leverage against China if they continue to make concessions toward a trade deal.

On Friday, Japan’s Nikkei 225 Index settled at 23391.87, up 61.55 or +0.26%. Hong Kong’s Hang Seng Index closed at 27651.14, down 196.09 or -0.70% and South Korea’s KOSPI finished at 2137.23, down 7.06 or -0.33%.

China’s Shanghai Index settled at 2964.18, down 14.53 or -0.49% and Australia’s S&P/ASX 200 closed at 6724.10, down 2.50 or -0.04%.

China’s Exports and Imports Fell Less Than Expected in October

China’s exports and imports declined in October, Reuters reported citing data from the country’s customs released on Friday. In dollar terms, exports fell 0.9% while imports fell 6.4% from a year ago in October, but beat analysts’ forecasts.

Trade balance for October was $42.81 billion, compared to analyst forecasts of $40.83 billion. Economists polled by Reuters had expected October exports to fall 3.9% and imports to fall 8.9% from a year earlier.

U.S.-China Trade Relations

On Thursday, China’s Commerce Ministry said that Beijing had agreed with Washington to lift existing trade tariffs between the two nations in phases.

The markets liked the news, but it may have caused some internal divisions inside the Trump Administration, with “his more hawkish advisers warning that removing tariffs without more substantial commitments from China to end its problematic behavior will do little to resolve America’s concerns and amount to a capitulation,” according to The New York Times.

Surge in Treasury Yields Erases Recession Warning

According to CNBC, “The bond market has officially switched off its recession alarm and is pointing to the potential for stronger growth.”

During the summer, the fear of a global economic meltdown gripped the bond market, triggering an inverted yield curve. However, conditions have changed considerably since then following three rate cuts by the Fed, stronger corporate earnings and a better outlook for U.S.-China trade relations.

On Thursday, yields posted their biggest one day jump in the 10-year Treasury note since President Trump was elected president. Strategists say yields are now in an uptrend, but they do not see the 10-year moving much above 2% in the short-term.

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