Asian investors were cautious on Tuesday as they keep watch on the historic summit between Donald Trump and North Korean leader Kim Jong Un, and await key policy meetings at the Federal Reserve and European Central Bank this week.
While the meeting is not expected to see any immediate results, it has provided hope for peace on the Korean peninsula.
But there remain some concerns about a possible global trade war after the weekend’s Group of Seven summit in Canada ended with Trump withdrawing support for a joint communique and accusing host Prime Minister Justin Trudeau of being dishonest.
That come just after he had hit Canada, Mexico and the European Union with steel and aluminium tariffs, sparking threats of retaliation that some fear could escalate.
But for now eyes are on Singapore, where Trump and Kim became the first sitting leaders of their countries to meet.
The pair shared a historic handshake ahead of unprecedented talks to tackle a tense decades-old nuclear stand-off and an enmity stretching back to the Cold War.
“The way to come to here was not easy,” Kim said, sitting at a table with Trump. “The old prejudices and practices worked as obstacles on our way forward but we overcame all of them and we are here today.”
‘Air of optimism’
Stocks fluctuated through the morning and by the break Tokyo was up 0.3 percent, while Sydney rose 0.2 percent.
Hong Kong pared early gains to sit flat, while Shanghai slipped 0.2 percent. Singapore dipped 0.1 percent and Seoul was marginally lower.
“After quickly shrugging off the G7 fight club in Quebec, investors latched on to the air of optimism circulating from the Singapore summit,” said Stephen Innes, head of Asia-Pacific trading at OANDA.
“And with pro-euro signals emanating from the newly formed Italian government placating investors anxiety about the future of the eurozone, the global risk was in the happy zone Monday.”
While the Trump-Kim summit is the big news story, traders are keenly awaiting the Fed and ECB policy meetings. The US bank is expected to lift interest rates Wednesday but its post-meeting statement will be closely watched for a clue about its plans for future hikes.
Then on Thursday, European bank officials will likely debate for the first time cutting back on their crisis-era stimulus program.
The euro rallied Monday on the back of comments from new Italian Finance Minister Giovanni Tria ruling out an Italian exit from the single currency. That eased concerns about his populist, Eurosceptic government’s intentions regarding the currency bloc.
However, the single currency dropped slightly in Asia, while the pound was also under pressure as British MPs prepare to vote on a string of amendments to key Brexit legislation that could force Prime Minister Theresa May’s hand in talks with the European Union. AFP