Dovish BOJ Boosts Asian Stocks, but US-China Worries Dampen Rally

Some of the optimism over the timing of the US-China trade deal was dampened on Thursday after President Donald Trump said the U.S. will probably know in the next three or four weeks about a possible trade deal with China.
James Hyerczyk
Asian Stock Markets

The major Asian stock indexes moved higher on Thursday, boosted by a positive outlook for cheap money and liquidity following the Bank of Japan’s dovish monetary policy decision and economic outlook. The indexes were also somewhat underpinned by new Brexit developments, but gains were likely being capped by renewed uncertainty over the timing of a U.S.-China trade deal.

At 04:44 GMT, Japan’s Nikkei 225 Index was trading 21493.81, up 206.79 or +0.97%. Hong Kong’s Hang Seng Index was at 29124.18, up 272.79 or +0.95% and the South Korean KOSPI Index was trading 2169.52, up 13.84 or +0.64%.

In Australia, the S&P/ASX 200 was trading 6190.30, up 10.70 or +0.17% and in China, the Shanghai Index rose 46.08, up 1.54% at 3036.76.

BOJ Remains Dovish

Early Friday, the Bank of Japan kept its monetary policy steady as widely expected. Its benchmark short-term interest rate will remain at minus 0.1 percent. Additionally, the central bank said it will purchase Japanese government bonds so that the 10-year JGB yields will remain at around zero percent.

In its policy statement, the BOJ offered a relatively weak assessment of the Japanese economy and predicted it will “continue its moderate expansion, despite being affected by the slowdown in overseas economies for the time being.”

U.K. Hoping to Delay Exit from European Union

Further underpinning Asian stocks on Friday was the news that the British Members of Parliament (MPs) voted in favor of seeking a delayed departure from the European Union for at least three months. There are still some uncertainties over the proposal since the vote was nonbinding. Furthermore, the EU will still have to agree to a delay.

US-China Trade Agreement Probably Delayed

Some of the optimism over the timing of the US-China trade deal was dampened on Thursday after President Donald Trump said the U.S. will probably know in the next three or four weeks about a possible trade deal with China.

Other news services reported that Chinese negotiators have suggested combining a long-discussed state visit by President Xi Jinping to the U.S. with the announcement of a trade deal. However, both sides seem to agree that no meeting will take place between the two leaders until every line item is agreed upon. Neither the US nor China wants to have the safe outcome as the nuclear talks between the United States and North Korea where Trump walked away from the negotiating table after the North Koreans demand the US stop its sanctions against the rogue nation.

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