Asian shares up, yuan at 5-mth high as Biden-Xi call stokes optimism

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HONG KONG (Businesshala) – Asian stocks edged higher than 2-1/2-week highs as investors opened cordially to a crucial meeting between US President Joe Biden and Chinese leader Xi Jinping, which saw China’s yuan plummet for five months. helped to reach higher levels. And pulled the dollar down widely.

FILE PHOTO: A woman wearing a protective mask, amid the COVID-19 outbreak, walks past an electronic board displaying stock indexes of Japan and other countries outside a brokerage in Tokyo, Japan, September 21, 2021. Businesshala / Kim Kyung-hoon

Biden and Xi Jinping began their closely watched conversation warmly, with both leaders emphasizing their responsibility to the rest of the world to avoid conflict, with the Chinese leader calling the US president an “old friend”.

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MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.27% to its highest level since October 27, while Tokyo’s Nikkei rose 0.4%.

The talks began at 0046 GMT on Tuesday and Chinese state media reported they concluded at 12:24 pm (0424 GMT) in Beijing.

“The video call is very important because I think tensions between the two countries are easing and I think overall market sentiment will continue to improve,” said Dickie Wong, executive director of research at Hong Kong-based Kingston Securities.

Sino-US relations have faced prolonged tensions under the former Trump administration and the two sides have recently escalated a war of words over a wide range of contentious issues including Taiwan as well as trade and technology.

Tensions between the world’s two top economies have rattled global markets at times over the past few years, so any optimism emanating from the talks would be seen as a boon for riskier assets.

A favorable opening of talks helped push the onshore and offshore yuan higher in morning trade, with the onshore spot price hitting a high of 6.3666 per dollar, its strongest since June 1.

In stock markets, Chinese blue chips jumped 0.5% and Hong Kong benchmark 1%, which was also lowered by asset stocks following suggestions of an easing of policy restrictions on the sector.

David Chao, Asia Pacific (ex-Japan) global market strategist at Invesco, said, “So far we have not seen a lack of trust in some developers and the government has come out more strongly to ensure that homeowners are safe. Huh.”

An index of Hong Kong-listed mainland Chinese developers rose up to 3%. However, shares of Kaisa Samridhi, a property services arm of troubled developer Kaisa Group, fell 13.5% after the company said its parent’s liquidity issues would not affect operations. [L4N2S70BD]

US stock futures were flat on Tuesday after Wall Street closed, as rising Treasury yields dampened appetite for technology stocks but fueled interest in financials. [.N][US/]

The benchmark 10-year US Treasury yield eased on Tuesday and was at 1.6008%, though still up sharply after hitting a one-month low of 1.42% a week ago, a key factor in the dollar’s overall strength.

However, the dollar eased in response to better sentiment after the Biden-Xi call, losing ground on the euro, which jumped nearly 0.2% from a 16-month low and was last at $1.1381.

Money markets are also being driven by varying responses to rising inflationary pressures from global central banks.

European Central Bank President Christine Lagarde on Monday stressed market bets for a tighter monetary policy, saying doing so now to contain inflation could stall the euro area’s recovery. A muted tone left the euro struggling to shake off the bears.

Britain will publish its September labor market report later on Tuesday, which CBA analysts said could “make or break the case for rate hikes this year”.

Later, US retail sales, trade prices and industrial output for October are also giving another indication about the health of the world’s largest economy.

US crude rose 0.59% to $81.36 a barrel in oil markets. Brent crude rose 0.76% to $82.68 a barrel. [O/R]

Gold was stable, with spot gold up 01% to $1,864 an ounce, from Monday’s five-month high of $1,870. [GOL/]

Reporting by Alan John; Editing by Sam Holmes and Sri Navaratnam

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