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Asian equities swing as trade cues awaited, Hong Kong in focus

HONG KONG: Asian markets fluctuated Thursday with investors shifting cautiously following another Wall Street record as Donald Trump hailed progress in the China trade talks, while eyes are also on Hong Kong after another night of violent protests.

Trading floors were edgy as a volatile week continued, with very few details from Washington and Beijing on negotiations for their mini tariffs agreement.

Trump’s comments on Wednesday that “our trade agreement with China is moving along very rapidly” provided some support, though observers said markets were looking for something concrete to buy into.

“Risk-off continues to linger seemingly on the lack of good news on trade talks with China,“ said AxiTrader senior market analyst Stephen Innes. “At this stage, even a date and a location… would be a good thing.”

Equities have seen healthy rallies in recent weeks on optimism the two sides would soon reach a partial deal as part of a wider agreement to end their long-running trade war that has hit the global economy.

Michelle Girard, chief US economist at Natwest Markets, told Bloomberg TV: “We’ve been pushing back on a lot of this trade optimism and it’s felt kind of lonely because markets have certainly embraced the news that we might have a short-term deal.

“We are not there yet.”

Adding to the unease was a report that China was hesitating over aspects of the deal, which came after Trump dismissed Beijing’s claims last week they had a plan to roll back some tariffs as the talks progressed.

Fresh Hong Kong unrest

Tokyo fell 0.2 percent by the break after data showed Japan’s economy grew at a slower pace than forecast in the third quarter as it was hit by trade wars.

Shanghai dropped 0.1 percent and Taipei eased 0.3 percent, while Manila and Jakarta were also down.

Sydney rose 0.6 percent, Seoul edged up 0.2 percent and Wellington put on 0.5 percent while Singapore was flat.

Hong Kong fell 0.4 percent following another night of unrest in the city, which has seen a pick-up in violence since the weekend as protesters blocked roads in certain districts — closing businesses — and disrupted public transport for a fourth day.

The standoff has hammered the Hang Seng Index, which has lost around four percent this week, while there are concerns about possible intervention by Beijing.

There was little reaction to the head of the Federal Reserve saying he did not expect the central bank to lift interest rates for a fourth time this year, and that the economy would probably continue to grow but faced risks from a global slowdown and trade disputes.

In the first of two days of congressional testimony, Jerome Powell also urged lawmakers to take action on the rising US debt and deficit to ensure continued growth.

On currency markets, the Chilean peso was sitting at a record low 795 to the dollar, forcing the country’s central bank to pump $4 billion into financial markets for support. The unit has been battered by nearly four weeks of protests against the economic policies of right-wing President Sebastian Pinera. – AFP


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China, U.S. agree tariff rollback if phase one trade deal is completed

WASHINGTON/BEIJING: China and the United States have agreed to roll back tariffs on each others’ goods in a “phase one” trade deal if it is completed, officials from both sides said on Thursday, sparking division among some advisers to President Donald Trump.

The Chinese Commerce Ministry, without laying out a timetable, said the two countries had agreed to cancel the tariffs in phases.

A U.S. official, speaking on condition of anonymity, confirmed the rollback would be part of the first phase of a trade agreement that is still being put to paper for Trump and President Xi Jinping to sign.

White House spokeswoman Stephanie Grisham told Fox News Channel the United States is “very, very optimistic” about completing a deal that would defuse a 16-month trade war between the world’s two largest economies.

“I cannot get ahead of the talks with China, but we are very, very optimistic that we will reach a deal soon,“ she said.

White House trade adviser Peter Navarro, however, said in an interview with Fox Business Network: “There is no agreement at this time to remove any of the existing tariffs as a condition of the phase one deal.”

“They’re just negotiating in public, trying to push this in a direction,“ Navarro said of reports he said were put out by “Chinese propaganda press.”

Experts warn the pact could still fall apart. U.S. officials said a lot of work remained to be done when Trump announced the outlines of an interim deal last month.

Trump has used tariffs on billions of dollars of Chinese goods as his primary weapon in the protracted trade war. The prospect of lifting them, even in phases, has drawn fierce opposition from advisers in and outside of the White House who remain wary of giving up a key aspect of U.S. leverage.

U.S. stocks pared gains after Reuters reported that the plan faced internal opposition.

“There is no specific agreement for a phased rollback of the tariffs,“ said Michael Pillsbury, an outside adviser to Trump.

“The American side has been ambiguous when and which tariffs will be lifted. The Chinese have some wishful thinking and are trying to soothe their domestic hardliners that the tariffs will someday come off.”

If an interim deal is finished and signed, it is widely expected to include a U.S. pledge to scrap tariffs scheduled for Dec. 15 on about $156 billion worth of Chinese imports, including cell phones, laptop computers and toys.

Tariff cancellation was an important condition for any agreement, Chinese Commerce Ministry spokesman Gao Feng said, adding that both must simultaneously cancel some tariffs on each other’s goods to reach the phase one pact.

“Both sides have agreed to cancel additional tariffs in different phases, as both sides make progress in their negotiations,“ Gao told a regular briefing.

A spokesman for the U.S. Treasury department declined to comment and the U.S. Trade Representative’s office did not immediately respond to a request for comment.

Republican lawmakers are urging the Trump administration to tie any tariff rollbacks to Beijing’s compliance with specific elements of the agreement.

“The tariffs should be phased out piece by piece as China complies,“ one congressional source said.

Trump-Xi meeting

In what could be another gesture to boost optimism, China’s state news agency Xinhua reported late on Thursday that the Chinese customs and Ministry of Agriculture are considering removing restrictions on U.S. poultry imports.

China has banned all U.S. poultry and eggs since January 2015 due to an avian influenza outbreak.

The optimism over a phase one trade deal boosted stocks globally; bond yields shuffled higher.

A source previously told Reuters that Chinese negotiators wanted the United States to drop 15% tariffs on about $125 billion worth of Chinese goods that took effect on Sept. 1.

They also sought relief from earlier 25% tariffs on about $250 billion of imports, ranging from machinery and semiconductors to furniture.

A person familiar with China’s negotiating position said it was pressing Washington to “remove all tariffs as soon as possible”.

A deal may be signed before the end of the year by Trump and Xi at a yet-to-be determined location.

Dozens of venues have been suggested for a meeting, which had originally been set to take place on the sidelines of a now-cancelled mid-November summit of Asia-Pacific leaders in Chile, a senior Trump administration official told Reuters on Wednesday.

One possible location was London, where the leaders could meet after a NATO summit that Trump is due to attend on Dec. 3-4, the official said.

Gao declined to say when and where such a meeting could be held.

Since Trump took office in 2017, his administration has been pressing China to curb massive subsidies to state-owned firms and end the forced transfer of American technology to Chinese firms as a price of doing business in China.

The president’s tough stance on China has earned him praise from his political base, and he may be reluctant to appear conciliatory on the issue going into his 2020 re-election campaign. But Trump has also sought to portray stock market gains as a reflection of his stewardship of the economy, and the market has reacted positively to any hints of an end to the two countries’ trade dispute. – Reuters


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