Asian markets follow global shares higher, trade war still in focus

Asian stocks rose in early trade on Thursday following a second day of gains on global share markets amid easing investor concern over the impact from the US-China trade war, but markets remained cautious.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.05 per cent in early trade in Asia, taking support from Wall Street overnight. Japan's Nikkei stock index was 0.2 per cent higher, while Australian shares eased 0.3 per cent.

The Dow Jones Industrial Average ended 0.61 per cent higher on Wednesday at 26,405.76, its highest close since late January, while the S&P 500 gained 0.13 per cent to 2,907.95. The Nasdaq Composite dropped less than 0.1 per cent, to 7,950.04, pulled down by a fall in Microsoft.

US shares had been boosted by expectations that the impact of the Sino-US trade war would be smaller than feared, with the US fiscal policy package potentially outweighing any negative impact. But analysts at Citi cautioned in a note that housing data out this week showed signs of weakness despite a headline jump.

Citi said housing starts had been strong, but building permits—a indicator of future activity—were at their lowest since May 2017. “The housing market remains a specific point of weakness in the US economy and while not in focus, it could be important... housing data on Tuesday wasn't encouraging on net.”

The rally in global stocks has been accompanied by falls in US bonds and the Japanese yen. The yield on benchmark 10-year Treasury notes, which on Wednesday touched its highest level since May 18, was at 3.0626 per cent Thursday, compared with its US close of 3.083 per cent.

This week's rise in yields comes ahead of what is expected to be a hawkish meeting of the US Federal Reserve next week.

The two-year yield, which is sensitive to market expectations of Fed rate hikes, was at 2.7949 per cent compared with a US close of 2.807 per cent.

The dollar was flat against the yen at 112.26, and against the euro at $1.1673. The dollar index, which tracks the greenback against a basket of six major rivals, was nearly unchanged at 94.558.

US crude ticked up 0.4 per cent at $71.43 a barrel, adding to a rise Wednesday after new data showed US crude inventories fell 2.1 million barrels last week, its fifth weekly drawdown, to 394.1 million barrels. That was the lowest level since February 2015. Brent crude fell 0.1 per cent to $79.31 per barrel.

A weakening dollar pushed up the price of gold on Wednesday, but the precious metal was flat on Thursday morning in Asia. Spot gold was trading at $1,203.61 per ounce.

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