Asian Shares Broadly Higher As Trade War Worries Ease

Asian stocks ended broadly higher on Monday after the U.S. and China agreed to put the trade war on hold and set up a framework for addressing trade imbalances in the future.

Chinese stocks rose after the U.S. and China made meaningful progress in two days of high-level talks. The benchmark Shanghai Composite index gained 20.54 points or 0.64 percent to finish at 3,213.84 while Hong Kong’s Hang Seng index ended up 0.6 percent at 31,234.35.

A weaker yen and solid trade balance data helped lift Japanese shares, with the Nikkei average closing up 72.01 points or 0.31 percent at 23, 002.37, extending gains for the third consecutive session. The broader Topix index closed marginally lower at 1 813.75.

Japan posted a merchandise trade surplus of 625.977 billion yen in April, the Ministry of Finance said – up 30.9 percent on year. The headline figure exceeded expectations for a surplus of 440.0 billion yen following the downwardly revised 797.0 billion yen surplus in March (originally 797.3 billion yen).

Exporters closed modestly lower despite the yen falling to more than a 4-month low of 111.37 against the greenback. Advantest lost 4.1 percent, Sompo Holdings fell as much as 6.9 percent and MS&AD Insurance Group shed 4 percent.

Australian shares ended little changed with a negative bias, dragged down by financials and material stocks. The benchmark S&P/ASX 200 and the broader All Ordinaries index both closed marginally lower at 6,084.50 and 6,190.20, respectively.

Banks followed their U.S. peers lower, with Commonwealth, NAB and Westpac ending down between 0.6 percent and 0.7 percent.

Mining heavyweights BHP Billiton and Rio Tinto dropped 0.4 percent and 0.9 percent, respectively amid declining iron ore prices.

Energy stocks surged higher, with Santos climbing 1.8 percent after it received an improved $US10.84 billion ($14.4 billion) offer from Harbour

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Sensex, Nifty To Open On Flat Note

Indian shares look set to open largely unchanged on Monday as investors digest the formation of a non-BJP government in Karnataka and fret about possible larger opposition unity in the 2019 that could spoil Prime Minister Narendra Modi’s bid for a second term.

Two days after he took oath as the 15th Chief Minister of the state, BS Yeddyurappa resigned from his post on Saturday and the governor invited the JDS-Congress combine to form the government.

The swearing-in ceremony will be held in Bengaluru’s sprawling Kanteerava stadium on Wednesday.

Besides the ongoing political developments in Karnataka, oil price movements, the direction of rupee and the latest batch of quarterly results may sway sentiment as the week progresses.

Brent crude oil prices moved toward the $80 a barrel mark last week, boosted by plummeting Venezuelan production, strong global demand and looming U.S. sanctions on Iran.

According to finance ministry estimates, rising crude oil prices may inflate India’s import bill by around $25 billion to $50 billion.

Bata India, Bosch, Cipla, Dr Reddys Lab, IndianOil, State Bank of India and Tata Motors are among the prominent companies that will unveil their quarterly earnings this week.

Benchmark indexes Sensex and the Nifty ended down about 2 percent last week as a slew of domestic and external factors curbed investors’ appetite for risk.

The rupee fell by 68 paise to close at 68.01 against the dollar last week amid persistent selling by foreign funds.

Asian stock markets are turning in a mixed performance this morning despite news that the U.S. and China have reached an agreement to set up a framework for addressing trade imbalances in the future.

The dollar edged up versus the yen on receding trade war fears while Brent crude futures were up slightly at $78.87 per barrel.

U.S stocks closed

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Dow futures rise 200 points as China trade truce fuels fresh optimism

Wall Street stocks were poised to rally on Monday, with Dow futures up 200 points as investors welcomed weekend news of an agreement between the U.S. and China that could reduce the American trade deficit with the world’s No. 2 economy.

What are markets doing?

Dow Jones Industrial Average futures YMM8, +0.88%  jumped 208 points, or 0.8%, to 24,929, while S&P 500 futures ESM8, +0.51%  gained 14 points, or 0.5%, to 2,727, and Nasdaq-100 futures NQM8, +0.51%  rose 42.50 points, or 0.6%, to 6,916.50.

Last week, both the Dow DJIA, +0.00% and the S&P 500 SPX, -0.26% fell 0.5%, the third weekly decline of the past four for both. The Nasdaq Composite Index COMP, -0.38% sank 0.7%. The small-cap benchmark Russell 2000 index RUT, +0.08%  rose 1.3% for its third straight positive week, its longest such streak since January.

Read: The strong dollar is a stock-market drag and poses a threat to earnings growth

What’s driving the market?

The mood was upbeat after Treasury Secretary Steven Mnuchin said over the weekend that the Trump administration would delay implementing tariffs on Chinese goods and “put the trade war on hold,” while working out details of a deal after two days of negotiations between officials.

Even so, the picture wasn’t completely clear as hours later, a conflicting statement was released from U.S. trade representative Robert Lighthizer who said Washington may still resort to tariffs.

Read: Is trade war with China ‘on hold’? Conflicting statements from Trump administration

Worries over trade talks contributed to a sluggish session on Friday, along with concerns about higher bond yields. The 10-year Treasury note yield TMUBMUSD10Y, -1.45%  saw its biggest weekly climb in roughly three years last week. The yield was hovering around 3.07% on Monday, after touching a seven-year intraday high of 3.126% on Friday. Higher

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