Two-Sided Trade in China Highlights Concerns Over Fed Policy, Trade Relations

The price action suggests traders will need a few more days and sessions to interpret the recent change in Fed positioning and to absorb the further developments with regard to trade and geo-political factors,
James Hyerczyk
Asian Markets

The major stock indexes in Asia posted two-sided trades on Friday with the choppy price action indicating uncertainty over the new dovish moves by the U.S. Federal Reserve and lingering concerns over the lack of progress in U.S.-China trade negotiations.

The mainland Chinese markets were among the most volatile. Early in the session, the Shanghai Composite was down about 0.77 percent before turning higher later in the session. At 06:45 GMT, the Shanghai Index was trading 3097.87, down 3.59 or -0.12%.

The Shenzhen Component was down 1.242 and the Shenzhen Composite fell 1.092 percent early in the session. Additionally, the CSI 300 Index posted an earlier loss of 0.99 percent.

Traders in Hong Kong pushed the Hang Seng Index down about 0.54 percent early in the session. The catalyst behind the sell-off was a drop in shares of Tencent. The tech giant lost 1.27 percent after the company reported its slowest annual profit growth in 13 years. Later in the session, the index was able to pare some of those losses. At 06:54, the HSI is at 28947.69, down 123.87 or -0.43%.

Japan’s Nikkei 225 Index, South Korea’s KOSPI Index and Australia’s S&P/ASX 200 Index bucked the trend with stronger performances.

In Japan, the Nikkei rebounded from earlier losses that were fueled by weak annual core consumer inflation data in February. The report showed that the nationwide core consumer price index (CPI), which includes oil products but excludes volatile fresh food costs, rose 0.7 percent in February from a year earlier. This was lower than a median market forecast for a 0.8 percent gain.

The report went on to say that the slowdown from January’s 0.8 percent increase was due largely to a 1.3 percent drop in gasoline prices, which was the first year-on-year decline since November 2016.

At 07:03 GMT, the Nikkei 225 Index is trading 21627.34, up 18.42 or +0.09%.

Shares in South Korea were mostly driven higher by strong performances by Samsung Electronics, SK Hynix and Micron. The catalysts behind the rally were positive comments from U.S. chipmaker Micron Technology. On Wednesday, the company said it sees a recovery in the memory chip market coming and reported a quarterly profit that beat estimates as cost controls helped offset falling demand and prices, sending its shares up nearly 5 percent.

At 07:09 GMT, the KOSPI Index is trading 2186.95, up 2.07 or +0.09%.

Shares in Australia outperformed all of the other Asia-Pacific indexes. The S&P/ASX 200 Index settled at 6195.20, up 28.00 or +0.45%. Nonetheless, investors continued to express uncertainty due to the strengthening of the Fed’s dovish stance, worries of a rate cut later in the year by the Reserve Bank and concerns over the lack of progress in U.S.-China trade relations.

Analysts at Rakuten Securities Australia said in a note, “It certainly feels like markets will need a few more days and sessions to interpret the recent change in Fed positioning and to absorb the further developments with regard to trade and geo-political factors, investors will be hoping for more smooth trading conditions in the weeks ahead but at the moment, it doesn’t look like they are going to get them.”

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