World shares slip on jitters over China-US trade deal

BANGKOK (AP) – World shares were mostly lower yesterday as conflicting reports raised concerns over the likely outcome of a trade deal to be signed by the United States (US) and China.

Britain’s FTSE 100 edged 0.1 per cent higher to 7,628.81, while the CAC 40 in Paris was flat at 6,039.14. In Germany, the DAX lost 0.1 per cent to 13,441.33. Wall Street looked set for a quiet start, with the future contract for the Dow down 0.2 per cent at 28,882.00. The S&P 500 future edged 0.1 per cent lower to 3,283.20.

Markets have regained upward momentum with expectations that Chinese and US officials will sign a preliminary trade agreement in Washington that will stave off a further escalation of tensions between the two biggest economies.

However, concern over whether the deal will stick overshadowed that optimism after US Treasury Secretary Steven Mnuchin said the deal will not reduce any punitive tariffs imposed on imports from China until after the two sides reach a further agreement.

“The only way the President will be reducing the tariffs is if there is a ‘Phase 2’ part of the agreement that is also fully enforceable,” Mnuchin said in an interview on Fox News.

A currency trader talks near the screens showing the foreign exchange rates at the foreign exchange dealing room in Seoul, South Korea. PHOTO: AP

Meanwhile, a report said that the Trump administration was preparing to propose a rule that would tighten restrictions of US sales of technology to China’s Huawei Technologies.

It is unclear if the deal to be signed takes such issues into account.

“The US – China trade deal is like watching a live show in the theatre of the absurd,” Ipek Ozkardeskaya of Swissquote Bank said in a commentary, noting that the tariff cuts will not take effect immediately. “The risk here is that the double-standard agreement could provide a weak basis for the future negotiations, impair the benefits, or even spoil the deal.”

Japan’s Nikkei 225 index lost 0.5 per cent to 23,916.58 while the Hang Seng in Hong Kong dropped 0.4 per cent to 28,773.59. The Shanghai Composite index gave up 0.5 per cent to 3,090.04. In South Korea, the Kospi slipped 0.4 per cent to 2,230.98. Shares also fell in Taiwan and in Southeast Asia. But the S&P ASX 200 climbed 0.5 per cent, breaching an intraday record high to 6,994.80.

The modest trade pact that US President Donald Trump and China’s chief negotiator, Liu He, are scheduled to sign does ease some sanctions on China. Ahead of the signing, the US Treasury Department dropped the US designation of Beijing as a currency manipulator. Mnuchin said that was because the trade deal includes a “fully enforceable” chapter on currency policies. Beijing, meanwhile, will step up its purchases of US farm products and other goods.

While the deal is limited in its scope, investors hope it will prevent further escalation in the conflict that has slowed global growth, hurt American manufacturers and weighed on the Chinese economy.

With the trade issue potentially entering a new phase, attention is shifting to corporate earnings.

Wall Street expects corporate profits for S&P 500 companies in the last three months of 2019 to be down by two per cent. That would be the first time that earnings for the S&P 500 would have declined four quarters in a row since the period ending in mid-2016, according to FactSet.

In other tradeing, benchmark crude oil lost 32 cents to USD57.91 a barrel in electronic trading on the New York Mercantile Exchange. It gained 15 cents on Tuesday, to USD58.23 per barrel.

Brent crude oil, the international standard, gave up 33 cents to USD64.16 per barrel. It gained 29 cents on Tuesday to USD64.49 a barrel. Gold rebounded, gaining USD8.00 to USD1,552.60 per ounce. The dollar slipped to JPY109.88 from JPY109.97 on Tuesday. The euro rose to USD1.1132 from USD1.1128.