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GLOBAL MARKETS-Asian shares advance on U.S.-China trade progress, ECB easing

Published 13/09/2019, 12:40 pm
© Reuters.  GLOBAL MARKETS-Asian shares advance on U.S.-China trade progress, ECB easing
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* Ex-Japan Asia MSCI up 0.3%, Nikkei gains 1.0%

* S&P 500 near record peak hit in late July

* Euro, bonds lose steam on profit-taking after ECB

By Hideyuki Sano

TOKYO, Sept 13 (Reuters) - Asian stocks advanced on Friday as hints of progress in U.S.-China trade talks and aggressive stimulus from the European Central Bank helped counter worries about a global economic slowdown.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS ticked up 0.3% though mainland China and South Korea were closed for public holidays. Japan's Nikkei .N225 rose 1.0% to four-month highs.

"Risk assets should find further support from accommodative policies, which are set to remain in vogue for some time, and not just in Europe as seen in the global easing trend," said Esty Dwek, head of global market strategy at Natixis in Geneva, Switzerland.

"Nonetheless, we believe that trade uncertainty and growth concerns will not vanish, so any reprieve on either subject will be welcome. We also believe that some earnings growth will be needed for equities to grind higher," she said.

The United States on Thursday welcomed China's renewed purchases of U.S. farm goods while maintaining the threat of U.S. tariff hikes as the world's two largest economies prepared for talks aimed at breaking their trade war impasse. said he preferred a comprehensive trade deal with China but did not rule out the possibility of an interim pact, even as he said an "easy" agreement would not be possible. bet optimism will prevail in the near future though most economists in a new Reuters poll believed the trade dispute will worsen or at best stay the same over the coming year. U.S. S&P 500 closed within striking distance of its all-time closing high, rising 0.29% to 3,009.57, near record closing high of 3,024.50 marked in late July. .N

Philadelphia semiconductor shares index .SOX hit an all-time high while MSCI ACWI .MIWD00000PUS also came near this year's high after seven straight days of gains by Thursday.

Sentiment found modest support from Trump's planned tax overhaul aimed at middle-income households next year. BANKS

The European Central Bank delivered bigger-than-expected stimulus, cutting interest rates by 0.10 percentage point to minus 0.50%, promising that rates would stay low for longer and restarting bond purchases of 20 billion euros a month from November. resumption of quantitative easing had been seen as a close call and helped to boost risk assets.

But the euro quickly lost steam and European bond yields also rose as profit-taking set in.

ECB President Mario Draghi stepped up his rhetoric in calling for governments to spend their way out of a slowdown, highlighting the limitations of monetary policy and also fanning expectations of fiscal spending down the road. euro stood at $1.10645 EUR= , having risen 0.5 percent on Thursday and staying near two-week high of $1.10875 hit in U.S. trade.

Rising risk appetite pushed the yen down to six-week low of 106.265 to the dollar JPY= .

The 10-year German Bund yields also rose back to minus 0.521% DE10YT=RR .

That also helped to lift the yield on 10-year U.S. Treasuries to as high as 1.801 percent US10YT=RR , its highest level since early August.

Fed funds rate futures 0#FF: price in an interest rate cut of 0.25 percentage point by the Fed next week but have effectively priced out any chance of a larger cut.

The Fed will announce its policy on Wednesday, followed by the Bank of Japan (BOJ) on Thursday.

Sources told Reuters the BOJ is leaning towards standing pat next week if markets are calm, but is brainstorming ways to deepen negative interest rates at minimal cost. think a rally in stock prices will run out of steam soon. It's typical buy-on-rumour-sell-on-fact trade on central bank stimulus and will be over by the Fed and the BOJ's meetings," said Tatsushi Maeno, senior strategist at Okasan Asset Management.

"People also seem to think there will be a deal between China and the States soon but you never know when suddenly Trump do about-face. We just saw that in May and August," he added.

Trump unveiled a hike in tariffs on $200 billion worth of Chinese imports in early May and announced another 10% tariff on the remaining $300 billion imports from China in early August. U.S. stock prices were at record levels on both occasions.

Oil prices were on course to post weekly losses, on continued worries about weakening demand and on speculation Trump may ease sanctions on Iran after his former national security advisor John Bolton, an Iran hawk, left the White House earlier this week.

Brent crude LCOc1 futures fell 0.2% to $60.28 a barrel while U.S. West Texas Intermediate (WTI) crude CLc1 lost 0.2% to $54.99. (Editing by Kim Coghill and Sam Holmes)

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