By Wayne Cole
SYDNEY (Reuters) – Stock rallies and bonds retreated in Asia on Monday as a temple in the trade-case against Chinese-US trade averted a threat against the global economy, which leads investors to prepare for aggressive political easing by the major central banks.
The dollar strengthened the message at the safe-haven yen that Treasury gives praise and futures reined in bets for a half-point cut from the US Federal Reserve this month.
"The Trump-Xi G20 meeting seems to be a modest gain for China and a positive for short-term risk management but well within the reach of expected results," said Westpac economist Richard Franulovich.
"Fed cut expectations are likely to see sustained trimming, but more for the July 31[ads1] meeting than next year," he added. "A 50 base point reduction seems very unlikely."
The first reaction was a relief that new tariffs were avoided, and Japan climbed 1.6% to a two-month peak. MSCI's widest index for Asia-Pacific shares outside Japan increased 0.4%.
Chinese blue pellets climbed 2.1% to the highest since late April. E-Mini futures for the rose 0.8% and futures 0.5%.
Treasury futures beat 10 ticks when returns on 10-year notes increased 3 basis points to 2.03%.
The Fed funds fell over 5 ticks as the market reduced the likelihood of a half-point cut in the month to around 13%, from close to 50% a week ago.
The United States and China agreed Saturday to start trade talks after President Donald Trump offered concessions to his Chinese counterpart Xi Jinping when they met on the sidelines of the G20 summit in Japan this weekend. These included no new tariffs and a relief on the technology company Huawei to reduce tensions with Beijing.
China agreed to create unspecified new purchases of US pharmaceutical products and return to the negotiating table.
] Nevertheless, there was no deadline for an agreement, and much damage has already been done, with two surveys of Chinese production over the weekend, showing a contraction in the activity.
The official purchasing manager index (PMI) held at 49.4 in June, lacking only forecasts, while Caixin / Markit PMI fell to 49.4, the worst reading since January.
Studies from Japan and South Korea showed similar decreases.
"Although a worst-case outcome has been rejected, tariffs remain and it is unlikely that ceasefire confers great confidence in corporate investment and employment decisions," says Tapas Strickland, chief financial officer at NAB.
"As such, it is likely that soft production conditions w ill continue to if and when a fuller deal is fleshed out. "
The reaction in foreign exchange markets was to remove some innovations from safe ports such as the yen and Swiss francs. The dollar crept up 0.2% on the yen to 108.15 and achieved 0.4% on the franc to 0.9801.
The dollar rose 0.2% on a basket of currencies to 96,355, but was slightly changed in euros to $ 1,1355. The dollar dropped 0.3% at 6.88432.
Dollars' gains took some of the brilliance of gold as fell 1.2% to $ 1,392.86 per ounce.
Oil prices jumped higher on news OPEC and its allies appear to expand Vendors at least until the end of 2019 when Iraq came to top Saudi Arabia and Russia. approve the policy
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