Asian shares moved in and out of positive territory on Thursday as investors stayed cautious over slowing global growth, rising U.S. interest rates and the trade fight between the United States and China.
China led the weakness, while Japan and Hong Kong also gave back earlier gains. MSCI’s broadest index of Asia-Pacific shares outside Japan briefly slipped after rising earlier in the session and was last up 0.1 percent.
The index has held up in November after three straight monthly declines, but it remained on course for its worst annual performance since 2011. Japan’s Nikkei was up 0.4 percent after easing from morning highs, while Chinese blue chips fell 0.8 percent and Hong Kong’s Hang Seng lost 0.1 percent.
Shane Oliver, Sydney-based head of investment strategy at AMP, said the rebound lacked conviction.
“This was a half-hearted rally to start with,” said Shane Oliver, Sydney-based head of investment strategy at AMP.
“Investors are still wary about whether they’ll see further lows given none of the issues that drove the recent correction have dissipated.”
He said the trade war, weaker corporate profits, the sharp sell-off in technology shares and higher U.S. borrowing costs were pushing investors to reduce risk before year-end.
Singapore added to the caution earlier on Thursday, warning that trade frictions are likely to hurt growth in the city state, which is often treated as a gauge of international trade and investment.
U.S. stock futures were little changed in Asian trading after Wall Street recovered overnight, though the bounce did little to improve sentiment. The S&P 500 ended higher but near session lows, while the Dow Jones Industrial Average gave up its gains and finished flat ahead of the U.S. Thanksgiving holiday.
Markets are now focused on a planned meeting between U.S. President Donald Trump and Chinese President Xi Jinping later this month. The two leaders are expected to meet on the sidelines of a G20 summit in Argentina at the end of November and early December.
The tariff battle between the two economies has already seen both sides impose import duties on each other’s goods, raising fears that global trade and growth could slow further. Investors are also watching manufacturing surveys from Japan, Europe and the United States due in the coming week.
Oliver said those reports could deepen the nervous mood if they weaken.
“PMIs have held up reasonably well so far but if they trend lower it could add to the nervousness,” AMP’s Oliver said.
Broader economic signals have also turned less encouraging. The global expansion that began roughly two years ago has plateaued, trade volumes are still rising but at a slower pace, and OECD leading indicators have weakened since the start of the year, pointing to softer growth ahead in the United Kingdom and the euro area.
Dollar strength and market moves ¶
The U.S. Federal Reserve has kept tightening policy after ending seven years of near-zero interest rates in December 2015. The fed funds rate now stands at 2.00 to 2.25 percent, and investors expect another increase in December.
That shift has helped the dollar outperform most major currencies in 2018. The dollar index was last down slightly at 96.64, while the yen edged up to 112.99 after two straight sessions of losses. The U.S. currency has risen almost 5 percent against a basket of major peers this year, while the yen was flat.
Marios Hadjikyriacos, an analyst at XM.Com, described the greenback as an “all weather currency.”
“It can shine both in risk-off sessions given its status as the world’s reserve asset, and on risk-on days as wide yield differentials brighten its carry appeal,” he said.
The euro also firmed on hopes that Italy’s budget dispute could be resolved, even as the European Commission moved to begin disciplinary steps over the country’s deficit. The single currency was last at $1.1396.
Oil prices gave back early gains but stayed above the one-year lows reached earlier in the week. U.S. crude futures were down 16 cents at $54.47 a barrel after touching $52.77 on Tuesday, while Brent slipped 18 cents to $63.30 after falling to $61.71 on Tuesday. Gold was firmer at $1,226.5 an ounce.
Editing by Shri Navaratnam
