Asian markets rose on Tuesday on growing speculation. US President Joe Biden is about to roll back some of the Trump-era tariffs on Chinese goods as he looks for ways to curb inflation, though sentiment remains tense on recession fears.
Sentiment on the trading floors has turned increasingly somber in recent months as observers warn that sharp hikes in interest rates to curb rising prices could lead to a contraction, adding to uncertainty caused by Russia’s war in Ukraine.
Still, shares rose on Tuesday amid talk that the White House is about to lift tariffs on some of China’s hundreds of billions of dollars worth of imports, with an announcement reportedly possible this week.
With some of the tariffs due to expire soon, Washington officials have debated the measures in light of inflation, which is at a four-decade high.
And in a sign something could be in sight, China’s state news agency Xinhua said Finance Minister Janet Yellen and Vice Premier Lui He had held talks.
“Both sides agree that as the global economy faces major challenges, it is of great importance to strengthen macro-political communication and coordination between China and the United States,” it said.
“And maintaining the stability of global industrial and supply chains together is in the interest of both countries and the world at large.”
Biden is also reportedly considering launching new investigations into industrial subsidies — which will allow more targeted action in strategic areas — to appease China hawks.
Hong Kong, Shanghai, Tokyo, Sydney, Seoul, Taipei, Wellington, Manila and Jakarta were all in positive territory.
“With inflation remaining the number one public enemy in the White House, (investors) are leaning toward a gradual rollback of some Chinese tariffs as it would lower the ultimate cost to US consumers,” said Stephen Innes of SPI Asset Management.
However, some commentators said that while the removal of some tariffs would be broadly welcomed by traders, they are unlikely to have a long-lasting impact on inflation.
“Markets are likely to react positively on the fly because at this point we are hungry for signs of positive news,” said Saxo Capital Markets’ Charu Chanana.
“But we don’t see any significant impact of the move on global growth and inflation dynamics.”
Oil prices rose on expectations that demand will continue to outpace supply as the Ukraine war rages on with no sign of an end, while investors are keeping an eye on China as it sees fresh Covid outbreaks that have led to some cities going into lockdown became.
Months of flare-ups in Shanghai and Beijing earlier in the year saw millions of people ordered to stay home, sending shockwaves through the domestic economy and battering supply chains.
“China is the real joker here: it’s going to take two steps forward and one step back,” said Australia & New Zealand Banking Group’s Daniel Hynes.
“A recovery in demand in China could potentially offset weakness in developed economies as central banks tighten monetary policy.”
– Key figures at 0230 GMT –
Tokyo – Nikkei 225: up 0.8 percent to 26,369.24 (breakthrough)
Hong Kong – Hang Seng Index: up 1.0 percent to 22,037.88
Shanghai — Composite: up 0.2 percent to 3,412.73
Dollar/yen: up 136.20 yen from 135.69 yen on Monday
Euro/Dollar: DOWN at $1.0430 from $1.0431
Pound/dollar: DOWN at $1.2106 from $1.2116
Euro/pound: up to 86.16p from 86.09p
West Texas Intermediate: up 2.3 percent to $110.87 a barrel
North Sea Brent Crude: up 0.6 percent to $114.16 a barrel
London – FTSE 100: up 0.9 percent at 7,232.65 points (close)
New York – Dow: Closed for public holiday
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