Asian shares bounced from two-month lows on Thursday as world equities recovered from a selloff triggered by escalating Sino-US trade tensions, with investors hoping a full-blown trade war between the world’s two biggest economies can be averted.
Sentiment was lifted as the United States expressed willingness to negotiate a resolution to the trade fight after the proposed US tariffs on $50 billion in Chinese goods prompted a quick response from Beijing that it would retaliate by targeting key American imports.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.5 per cent, a day after it hit its lowest in almost two months. Trade-dependent Singapore's Straits Times Index rose more than 2.0 per cent.
Japan's Nikkei gained 1.6 per cent while markets in mainland China, and those in Hong Kong and Taiwan, are closed for the Tomb Sweeping Day holiday on Thursday.
US S&P 500 mini futures rose 0.4 per cent in Asia.
On Wednesday, the S&P 500 gained 1.16 per cent and the Nasdaq Composite added 1.45 per cent, clawing back heavy losses of more than 1.5 per cent right from earlier in the US session.
Many investors viewed US President Donald Trump’s latest tariffs plan as part of his negotiation strategy, rather than his final policy.
Indeed, Trump’s top economic adviser, Larry Kudlow, when asked whether the latest US tariffs plan may never go into effect and may be a negotiating tactic, told reporters: “Yes, it’s possible. It’s part of the process.” He called the announcements by the two countries mere opening proposals.
The US trade actions will not be carried out immediately, giving the two countries room for manoeuvre and providing investors with hope of a compromise.
The proposed 25 per cent US tariffs on some 1,300 industrial technology, transport and medical products from China now see a public comment and consultation period that is expected to last around two months.
Many suspect Washington will likely back down on some fronts after Beijing threatened tariffs on US soybeans, the top US agricultural export to China.
It is considered one of the most powerful weapons in Beijing’s trade arsenal given the impact on Iowa and other farming states that backed Trump in the election.
Optimists also argued that the global economy is currently running so strong that it could cope with the impact of the proposed tariffs, which cover a fraction of the world’s trade.
US economic data published on Wednesday underscored the prevailing bullish view on the economy. US private payrolls increased solidly in March as hiring rose across the board, boding well for Friday’s jobs data.
Yet others also cautioned that uncertainties caused by fears of a trade war could result in many companies delaying capital expenditure investments in the near term.
Concerns about trade wars could also hit some specific assets, such as US soybeans and corn. Both products licked their wounds after having fallen 2.2 per cent and 1.9 per cent, respectively, on Wednesday on China’s trade moves.
Oil prices bounced back in tandem with global share prices, and on a surprise draw in US crude stockpiles.
US crude futures traded at $63.71 per barrel, up 0.5 per cent, reports Reuters.