Asian Stocks Rise Following U.S., China Set to Reopen
Asian stocks rose as traders navigated their way through the U.S.-China trade war and earnings from Wall Street’s big tech companies. China’s markets are set to reopen on Wednesday.
Shares in Australia and Japan rose along with futures for Hong Kong. Futures for U.S. equities edged lower as Google parent Alphabet Inc. and Advanced Micro Devices Inc. fell in extended trading. U.S. stock indexes had earlier recovered after a wave of dip-buying with Bloomberg’s gauge of the “Magnificent Seven” megacaps up 1.7%. Treasury yields edged up.
The first salvo in the latest U.S.-China trade war made it clear that Xi Jinping is taking a more cautious approach than during Donald Trump’s first term. After the U.S. leader granted a last-minute reprieve to Canada and Mexico, his 10% tariffs on China went into effect on Tuesday. Beijing quickly announced additional tariffs on about 80 products that will take effect on Feb. 10, but traders are hoping upcoming talks will ease tensions.
“There is a reasonable possibility that the final impact of these tariffs may be less than expected,” said Todd Ahlsten at Parnassus Investments. “These tariffs may also represent the first round of final negotiations, which could mitigate the eventual impact.”
In Asia, Chinese traders were on edge ahead of Wednesday’s market reopening as the tariff drama roils the investment landscape. Volatility will remain high as investors brace for escalation while also hedging against the chance of a sudden breakthrough. The offshore yuan recovered after Tuesday’s sharp drop. Chinese stocks in Hong Kong have shown resilience, while a gauge of U.S.-listed Chinese companies rose 2.7%.
“The uncertainty that was plaguing the market about tariffs is now gone and we have some clarity,” said Kenny Ng, a China strategist at Everbright Securities International. “This actually provides a clearer outlook for the market. I expect Chinese stocks to open relatively strong.”
Elsewhere, the Bank of Japan is likely to continue raising its benchmark interest rate to a level that exceeds current market consensus, according to a former executive director at the central bank. The yen strengthened to around 154 per dollar on Tuesday.
In commodities, oil fell slightly on concerns that the trade war would hurt global growth more than the announcement of tougher sanctions on Iran.
Source: Bloomberg
