Asian shares inched up from a two-month low just hours ahead of the Trump administration’s plan to raise tariffs on Chinese imports as investors looked to whether negotiators from the two countries can clinch a deal to avert the hike.
US President Donald Trump said on Thursday he had received a “beautiful letter” from Chinese President Xi Jinping, stoking hopes that Washington may suspend its plan to raise tariffs on $US200 billion worth of Chinese goods to 25 per cent from 10 per cent.
That provided some support for stocks in early Asian trade though sentiment remains cautious.
MSCI’s broadest index of Asia-Pacific shares outside Japan ticked up 0.2 per cent while Japan’s Nikkei rose 0.4 per cent. E-mini futures for US S&P500 rose 0.4 per cent in early Asian trade.
Yet with less than four hours left before the announced start of new rates at 2.01pm AEST on Friday, right in the middle of two days of meetings with a Chinese delegation, some see the risk of a fresh escalation in the trade war.
“I’d say there’s 50 per cent chance the tariffs will be raised as announced, which should lead to fresh selling in stocks later today,” said Norihiro Fujito, chief investment in Mitsubishi UFJ Morgan Stanley Securities.
China’s Vice Premier Liu He said he hopes to engage in a rational and candid exchange with the US after arriving in Washington for a new round of trade talks, China’s official Xinhua news agency reported.
Trump also said on Thursday he was taking steps to authorise new tariffs on $US325 billion in Chinese imports.
Concerns about renewed escalation in the trade tensions supported safe-haven assets.
The 10-year US Treasuries yield stood at 2.453 per cent near its lowest levels since late March.
In the currency market, the yen is favoured, with the US dollar changing hands at 109.71 yen, having hit a three-month low of 109.47 on Thursday.
The euro firmed to $US1.1220 while the Chinese yuan perked at 6.838 per US dollar having hit a four-month low of 6.8638 to the dollar the previous day.
MSCI’s emerging market currency index also tumbled to a four-month low.
Oil prices held firm after Trump’s comments on Xi’s letter raised hopes for a deal for now.
Brent rose 0.7 per cent to $US70.86 a barrel while U.S. West Texas Intermediate (WTI) crude gained 0.9 per cent to $US62.24 per barrel.