Stock Investors Cautiously Optimistic about Trade Deal after Trump Advisor Kudlow’s Comments

Asian equity markets are trading mixed on Wednesday as cautious investors braced for an important meeting between U.S. President Donald Trump and Chinese leader Xi Jinping at the G20 summit on November 30 – December 1 in Argentina.

At 0139 GMT, Japan’s Nikkei 225 Index is trading 22112.28, up 159.88 or +0.73%. Hong Kong’s Hang Seng Index was up 74.72 or +0.28% at 26406.68. South Korea’s KOSPI Index is at 2097.99, down 1.43 or -0.07%.

Investors are keeping a close eye on the performance of the mainland Chinese markets.

U.S. Equity Markets

The major U.S. equity indexes closed higher on Tuesday after shedding early session weakness. In the cash market, the benchmark Dow Jones Industrial Average finished 108.49 higher at 24,748.73. The benchmark S&P 500 Index rose 0.30 percent to settle at 2,682.20. The tech-based NASDAQ Composite closed slightly better at 7,082.70.

Stocks were under pressure early in the session after President Trump told the Wall Street Journal he was preparing to raise the tariffs on China from 10% to 25%. He also threatened to place tariffs on laptops and iPhones. This news drove shares of Apple sharply lower.

The indexes rebounded from their lows after National Economic Council Director Larry Kudlow said the Trump Administration was having “a lot of communication with the Chinese government at all levels” ahead of the critical meeting between Trump and Xi at the G-20 summit in Argentina.

Kudlow also told reporters Trump thinks there is a “good possibility” the two countries can reach an agreement.

U.S. Treasury Markets

U.S. Treasury yields finished relatively flat on Tuesday after Federal Reserve Vice Chair Richard Clarida said the Fed should continue to raise rates gradually. He also said the Fed’s monetary policy is “much closer” to a so-called neutral level. Furthermore, Clarida also stressed the importance of policymakers being “data dependent” and more cautious about further rate hikes.

“A monetary policy strategy must find a way to combine incoming data and a model of the economy with a healthy dose of judgment – and humility! – to formulate, and then communicate, a path for the policy rate most consistent with our policy objectives,” Clarida said in prepared remarks.