Shares up on US jobs report, but caution seen on trade talks

Andrew Cummings
October 7, 2019

Chinese officials are growing hesitant to pursue a broad trade deal with the negotiations set to begin this Thursday, people familiar with the matter told Bloomberg News.

A flurry of disappointing USA economic data last week suggested the ongoing trade war was starting to take its toll, stoking concerns of a possible recession.

There was no onshore yuan trading, as Monday is the last day of a long China holiday for its national day.

A man is reflected on a stock quotation board outside a brokerage in Tokyo, Japan. Japan's Nikkei stock index rose 0.29 percent, while Australian shares were up 0.48 percent.

The modest increase in U.S. jobs has eased some of these concerns, but traders warn that downside risks loom large on the horizon. The US unemployment rate fell to 3.5 per cent in September to reach the lowest since December 1969. People close to the administration, however, say the impeachment inquiry has not impacted trade talks with China.

The is some optimism around the resumption of the US-China trade talks this week but this has often in the past been misplaced, writes Robert Carnell - Chief Economist Head of Research Asia-Pacific at ING.

But administration sources late in September also said the US was considering imposing restrictions on investing in Chinese companies. "I see some scope for yen gains, but it is not likely to be a big move higher".

Such worries eased slightly after US September non-farm payrolls data on Friday came in fairly strong and the jobless rate fell to near a 50-year low.

MSCI's All-Country World Index, which tracks shares across 47 markets, flitted between positive and negative territory for most of trade in London.

The euro traded as low as US$1.0964 (RM4.60) but held off 2-1/2-year lows of US$1.0879 last Tuesday. Before the jobs report, traders saw a 85.2 per cent chance the Fed will cut rates by 25 basis points to 1.75 per cent-2.00 per cent this month, but that chance has now fallen to 81.1 per cent, according to CME Group's FedWatch tool.

The yield on the US 10-year Treasury rose to 1.524% on Monday, from 1.515% on Friday.

CURRENCIES: The dollar edged up to 106.84 Japanese yen from 106.77 yen Friday.

The ringgit opened marginally lower against the USA dollar today tracking the weakening Chinese yuan, said a dealer.

Oil prices rose. Brent crude futures were higher by 0.2% at $58.51 per barrel, while West Texas Intermediate (WTI) crude were 0.5% higher at $53.06.

"The US probably does not want to raise tariffs given recent signs of softening in the US economy, and markets hope for some sort of deal that allows them to keep talking in the future", Ishizuki said.

Political instability in Hong Kong could hurt market sentiment after China's army took the unusual step of issuing warnings to anti-government protesters in Hong Kong over the weekend.

Four months of often violent protests against Chinese rule has pushed the former British colony to the brink of recession and posed a serious challenge to Beijing's control of the city.

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