Asian stock markets regain ground despite warning lights for global economy
Asian stock markets have bounced somewhat following a tweet from US President Donald Trump floating a personal meeting with Chinese President Xi Jinping and saying “good things were stated” on a phone call between the two sides.
Read more: Recession warnings flash red as ‘yield curve’ inverts in UK and US
Equities in Asia recovered some ground as they raced towards market close after following their American and European counterparts downwards in the wake of a raft of bad economic data and indicators.
China’s SSE Composite index had opened around 1.6 per cent lower after the government bond “yield curve” inverted in both the US and the UK, which traditionally heralds a recession. Yesterday, Chinese industrial output growth was shown to have slowed to a 17-year low.
It looked as though Asian stock markets were copying those in Europe and the US, which shed between 1.8 and 3.1 per cent yesterday.
Yet the index had recovered by 7am UK time to be broadly flat. Hong Kong’s Hang Seng index was also flat after opening downwards.
David Madden, market analyst at CMC Markets, said that US President Donald Trump “tweeted about requesting a private meeting with [Chinese President] Xi Jinping in relation to Hong Kong”.
“He called for a ‘humane’ outcome in order to achieve a trade deal, and that helped markets move higher this morning.”
Trump tweeted: “Good things were stated on the call with China the other day.”
He went on to say: “I know President Xi of China very well. He is a great leader who very much has the respect of his people. He is also a good man in a “tough business.” I have ZERO doubt that if President Xi wants to quickly and humanely solve the Hong Kong problem, he can do it. Personal meeting?”
Japan’s Nikkei 225 was 1.2 per cent lower as fears over a recession drove investors towards the yen, traditionally a so-called safe haven at times of stress, pushing up costs for the country’s companies.
The Australian stock index the ASX closed down 2.9 per cent on fears of a US recession and a slowdown in China, which sent its banks and miners tumbling.
Overnight, the country’s central bank deputy governor Guy Debelle warned that Australia was threatened by the US-China trade war.
Some analysts were chalking up the bounce in Asian stock markets to a revaluation of the inversion of the yield curve.
A yield curve inversion means the yields – the interest holders receive – on long-dated bonds falls below those on shorter-dated bonds. It shows that markets think there is a high risk to future growth.
Read more: German economy shrinks in second quarter as exports slump
Yet former chair of the US Federal Reserve Janet Yellen told Fox Business Network that she thought “the US economy has enough strength to avoid” a recession. “But the odds have clearly risen and they are higher than I’m frankly comfortable with.”