Stocks mixed as trade war simmers

US equity futures also pared an advance as investors await the next chapter in the Sino-American trade dispute. (Reuters pic) 

SYDNEY: Asian shares traded mixed and US equity futures pared an advance as investors awaited the next chapter in the Sino-American trade dispute.

Australia’s dollar and stock market climbed after a surprise election victory for conservative Prime Minister Scott Morrison.

Stocks in Japan erased gains, while they declined in China and Hong Kong. South Korea’s shares came off their highs. Australian stocks outperformed.

In India, stock futures surged as exit polls showed Prime Minister Narendra Modi is poised to retain power. China’s offshore yuan strengthened, showing some relief after trade turmoil dragged down the currency to a five-month low.

Crude climbed after Saudi Arabia and other key producers in OPEC signalled their intention to keep oil supplies constrained for the rest of the year, while pledging to prevent any genuine shortages. The yen slipped.

Markets remain fragile after the escalation in the trade war with China calling on the US to negotiate on equal footing and Foreign Minister Wang Yi telling Secretary of State Mike Pompeo in a call that while it’s still possible to work out a deal, Beijing must safeguard its interests.

A slew of US data this week from home sales to manufacturing may offer some clues on the robustness of the economic expansion and Wednesday brings minutes from the Federal Reserve’s latest policy meeting.

“Right now, cash levels are at quite elevated levels and investors have money to put back into the market,” Michael Metcalfe, global head of macro strategy at State Street, told Bloomberg TV in Hong Kong.

“That dry powder, that potential for cash to come back in, means that once we get a resolution of the trade war and once we start to see better economic data, as we’ve just seen in Japan for instance, then that money is going to get dragged back out of cash into the market.”

Preliminary figures showed Japan’s economy expanded at a faster pace than expected in the first quarter, though there was caution about the momentum.

Elsewhere, Bank of America predicted India’s currency and bonds will also rise with stocks.

The Prime Minister’s Bharatiya Janata Party and its allies will win a majority of seats in parliament at the end of a gruelling six-week election that was marred by violence, exit polls showed.

Market closures will affect Singapore, Thailand and Malaysia on Monday.