Asia stocks gain as trade fears subside; yen falls

Pedestrians walk past an electronics stock indicator displaying share prices of the Tokyo Stock Exchange on Jan 4, 2018.
Pedestrians walk past an electronics stock indicator displaying share prices of the Tokyo Stock Exchange on Jan 4, 2018. PHOTO: AFP

SYDNEY (BLOOMBERG) - Stocks in Asia followed their US counterparts higher on Tuesday (March 27) on signs that an escalation of trade tensions was beginning to ease. The yen slipped and the South Korean won rallied as news emerged of a surprise visit to China by North Korea's leader.

Shares climbed in Japan, South Korea and Australia, while US equity futures built on a Monday rally that saw the S&P 500 Index post its biggest one-day jump since August 2015. The won was the best performer among Asian emerging-market currencies as Kim Jong Un was said to be making an unannounced visit to Beijing, his first known trip outside North Korea since taking power in 2011.

The MSCI Asia Pacific Index advanced 0.9 per cent as of 11:31am Tokyo time. Jaoan's Topix index climbed 1.8 per cent while Hong Kong's Hang Seng Index rose 0.7 per cent. In Seoul, the Kospi index rose 0.4 per cent while Sydney's S&P/ASX 200 Index increased 0.6 per cent.

Futures on the S&P 500 Index rose 0.3 per cent.

The resurgence in risk appetite emerged as the Trump administration was said to be urging China to lower tariffs on cars and open its market to US financial services as part of talks to resolve a rise in trade tensions. US Treasury Secretary Steven Mnuchin and his Chinese counterpart have been discussing the trade deficit between the two countries and were committed to finding a mutually agreeable way to reduce the gap and help China avoid tariffs on US$50 billion of exports to the US.

While global equities recovered losses sustained on Friday, the MSCI All Country World Index remains about 8 per cent lower than its record high reached in January.

"Our base case is that there won't be an all out trade war," Craig Macdonald, Aberdeen Standard Investments' global head of fixed income, said in a phone interview. "It's a way of applying pressure to get some wins by Trump."

Still, it will lead to more volatility, Macdonald added. "Our sense is that they will get some wins rather than all out war, but it's not something you can just dismiss. The tail risk is higher."

The yen nudged lower as risk-on sentiment returned. The Bloomberg Dollar Spot Index rose 0.1 per cent while the yen fell 0.2 per cent to 105.64 per US dollar.

Elsewhere, oil traded close to a two-month high as mounting political tensions and outright conflict in the Middle East, the world's biggest crude-producing region, failed to disrupt supplies. Russian assets were hit on Monday as the US and more than a dozen European nations announced a swathe of diplomatic expulsions in response to the poisoning of an ex-spy in the UK.

West Texas Intermediate crude rose 0.2 per cent to US$65.68 a barrel.

Gold fell less than 0.05 per cent to US$1,353.03 an ounce.