Asian Shares

Asian Shares Finishes Lower on Investor Trepidation Ahead of Trade Deal Signing

The major Asia Pacific stock indexes were mostly lower on Wednesday with Australia bucking the trend to finish higher for the session. Market sentiment is a little weaker today as investors await the signing of Phase One of the U.S.-China trade deal. Traders are basically following the roadmap set by Wall Street on Tuesday.

On Wednesday, Japan’s Nikkei 225 Index settled at 23916.58, down 108.59 or -0.45%. Hong Kong Hang Seng Index finished at 28773.59, down 111.55 or -0.39% and South Korea’s KOSPI Index closed at 2230.98, down 7.90 or -0.35%.

China’s Shanghai Index settled at 3090.04, down 16.78 or -0.54% and Australia’s S&P/ASX 200 finished at 6994.80, up 32.60 or +0.47%.

US-China Trade News

U.S. President Donald Trump is slated to sign the Phase One trade agreement with Chinese Vice Premier Liu He at the White House at 16:30 GMT.

Washington has already agreed to suspend tariffs on $160 billion of some Chinese-made electronics, and to halve existing tariffs on $120 billion of other goods to 7.5%. But the U.S. will leave in place 25% tariffs on a vast, $250 billion array of Chinese industrial goods and components used by U.S. manufacturers.

The fact that tariffs are likely to remain in place until after the 2020 U.S. presidential elections is rattling investors along with U.S. Treasury Secretary Steven Mnuchin’s comment that existing tariffs on Chinese goods would stay, pending further talks.

China’s Pledge to Buy US Manufactured Goods May Be Unrealistic

A source told Reuters that China has pledged to buy almost $80 billion of additional manufactured goods from the United States over the next two years under the deal, although some U.S. trade experts called that unrealistic.

The deal also includes $32 billion in agricultural purchases by China.

P.J. Quaid, a corn options broker at the CME Group in Chicago, said he’s eager to learn how the White House plans to enforce the tenets of the phase one deal if Beijing skirts its obligations.

“The thing’s been a crazy roller coaster since it started. A lot of people have become pessimistic because a lot of the purchases they said they’re going to make seem hard to attain,” Quaid said.

“If this thing comes in under expectations, you could see sell-off,” he added.

Signing Phase One Will Not End Trade War

CNBC writes, “Others were cautious after a Chinese media report suggested that Beijing isn’t as upbeat on the prospect for future talks. Taoran Notes, a blog run by a state-owned newspaper called Economic Daily, published its first blog post in two months on Sunday.

“We need to bear in mind that the trade war is not over yet. The U.S. hasn’t removed all the tariffs on Chinese imports and China is still imposing its retaliatory duties,” the blog wrote according to a CNBC translation. “There are still so many uncertainties ahead.”

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James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.