(May 10): Asian equities are set for a mixed start to trading Friday, still on track for their worst week since October, as the U.S. and China began a pivotal round of trade negotiations. Treasuries climbed and the yen edged higher.
Futures signaled modest declines in Tokyo and Australia, and a rebound in China, with hours to go before Washington ratchets up tariffs. The S&P 500 Index closed lower but losses were pared after President Donald Trump said he received a “beautiful letter” from Chinese President Xi Jinping and the two leaders would probably speak by phone. Sentiment remains fragile and the gap between 3-month and 10-year Treasury yields briefly turned negative, traditionally a recession warning.
Discussions are under way after Chinese Vice Premier Liu He arrived in Washington to start two days of talks with American officials including Robert Lighthizer, the top U.S. negotiator, and Treasury Secretary Steven Mnuchin. Earlier Thursday, President Donald Trump insisted a deal was still possible this week, even as he reiterated plans to raise tariffs on Chinese goods. U.S. tariffs on some $200 billion in Chinese goods are set to increase to 25% from 10% as of 12:01 a.m. on Friday -- that’s midday in Hong Kong.
“If tariffs are increased at 12:01 a.m. Friday, the decline in risk assets is likely to intensify,” said Dennis DeBusschere, head of portfolio strategy at Evercore ISI.
Meanwhile, simmering geopolitical tension elsewhere -- from North Korea testing missiles again to renewed stress between America and Iran -- added to the gloomy mood. Crude oil edged lower and emerging-markets stocks and currencies tumbled. The lira trimmed some losses after Turkey’s central bank unexpectedly raised borrowing costs for the country’s lenders.
These are the main moves in markets:
Futures on Japan’s Nikkei 225 fell 0.4% in Singapore. Hang Seng futures rose 0.3%. FTSE China A50 futures advanced 1.3%. The S&P 500 Index fell 0.3%.
The yen was at 109.77 per dollar. The offshore yuan held at 6.8348 per dollar. The Bloomberg Dollar Spot Index dipped 0.1%. The euro bought $1.1217, little changed.
The yield on 10-year Treasuries fell four basis points to 2.44%.
West Texas Intermediate fell 0.8% to $61.60 a barrel. Gold rose 0.1% to $1,285.79 an ounce. The Bloomberg Commodity Index fell 0.6%. - Bloomberg