Economy

Asia shares slump amid trade truce doubts

Asia shares slump amid trade truce doubts

The Dow Jones Industrial Average rose 225.51 points, or 0.88 percent, to 25,763.97, the S&P 500 gained 19.73 points, or 0.71 percent, to 2,779.9 and the Nasdaq Composite added 87.31 points, or 1.19 percent, to 7,417.85.

Asian shares fell today as relief over a pause in escalation of the trade war between the USA and China gave way to doubt over the two countries' ability to resolve differences.

"It seems that more details and signs of progress will be needed if the initial trade truce warm fuzzy feeling is to be sustained", National Australia Bank analysts said in a note to clients.

A truce between USA and Chinese leaders on trade tariffs provided a boost to global markets on Monday, fuelling a almost one per cent surge on world stocks and pushing emerging currencies higher across the dollar.

The CSI 300 of large caps rose 0.21 per cent, or 6.76 points, to 3,267.71, while the ChiNext was up 0.43 per cent, or 5.96 points, to 1,378.75. "Particularly contentious issues, like intellectual property rights and market access, have yet to be addressed, and we wouldn't be surprised if no agreement is reached in the 90-day period during which the USA has pledged to suspend its previously-planned tariff increases". Earlier, White House economic adviser Larry Kudlow told reporters it would start on January 1.

US President Donald Trump also said "China has agreed to reduce and remove tariffs on cars coming into China from the US".

The recent weakness in the dollar comes against the backdrop of a temporary truce in the US-China trade conflict agreed over the weekend, which has bolstered investor confidence in riskier currencies versus the safe-haven greenback.

Adding to worries over the outlook for the global economy, the yield curve between US three-year and five-year notes, and between two-year and five-year paper inverted on Monday - the first parts of the Treasury yield curve to invert since the financial crisis, excluding very short-dated debt.

Analysts expect an inversion of the two-year, 10-year yield curve - seen as a predictor of a U.S. recession - to follow suit.

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Asian shares fell in early trade on Tuesday as a relief rally sparked by a truce in the U.S. The two-year yield touched 2.8251 percent compared with a USA close of 2.833 percent.

That put the spread between 10-year and two-year Treasuries around 14 basis points.

"The market pricing evident in the yield curve inversion from three to five segment of the curve, as well as the dip in the 10-year yield below 3 per cent yesterday, goes to reinforce these concerns" about the USA economy potentially heading into a recession, said Prakash Sakpal, an economist at ING in Singapore. It added $2.02 to settle at $52.95 a barrel on Monday. Benchmark U.S. crude advanced 92 cents to $53.87 per barrel in electronic trading on the New York Mercantile Exchange while Brent crude rose $1.195 cents to $62.88 per barrel.

Telecommunications equipment giant ZTE, which was temporarily banned by the U.S. from buying parts from American suppliers for three months this year, continued to be positive ending up 0.72 per cent to HK$16.86, though gains were marginal in comparison to its 7.9 per cent jump on Monday.

In the currency market, the dollar index, which tracks the greenback against a basket of peers, softened 0.2 per cent to 96.808.

Price gains of more than two dollars a barrel were pared back after Qatar said it would leave OPEC next year as it looks to concentrate on its gas production, though it would continue to pump crude.

The Canadian dollar traded at an average of 75.65 cents United States compared with an average of 75.81 cents USA on Monday.

Traders pause for a moment of silence on the floor of the New York Stock Exchange (NYSE) in remembrance of former President George H.W. Bush in N.Y. on December 3, 2018.

Based on market data, the last time the Asian market reached this level of boost was in October.