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Hang Seng index clings on to gains as investors watch Hong Kong developments

Key Points
  • Hong Kong stocks mostly held on to gains on Thursday after seeing a surge on Wednesday following reports surrounding the withdrawal of a controversial extradition bill.
  • U.S. futures jumped during Asian trading hours after China said that U.S. trade officials had agreed to meet in early October for another round of negotiations.

Hong Kong stocks largely clung on to gains Thursday after seeing a 4% surge a day earlier, on the back of news that the city's controversial extradition bill that's sparked protests will be withdrawn.

The Hang Seng index closed just below the flatline at 26,515.53, after strong gains on Wednesday.

Hong Kong Chief Executive Carrie Lam on Wednesday fully withdrew a controversial extradition bill in Hong Kong that had sparked protests for months. It was one of five demands that protesters have been fighting for.

One investor described Wednesday's surge as a "technical rebound."

"I strongly think that ... (the) Hang Seng index will find a very, very concrete resistance at 27,000 points," Dickie Wong, executive director at Kingston Securities, told CNBC's "Street Signs" on Wednesday. "In terms of the local economy, it's still sluggish so I don't really see a real rebound in the short term."

Michael Yoshikami, founder and CEO of Destination Wealth Management, told CNBC's "Squawk Box" on Thursday that the "damage has been done."

"While I think this certainly appears to be a positive step forward toward some sort of resolution, I think the impact is going to be felt in Hong Kong," he said. "I think that is going to be something that we're going to be dealing with for a significant period of time, months, for sure."

In mainland China, shares saw gains on the day. The Shanghai composite gained 0.96% to about 2,985.86, while the Shenzhen component rose 0.86% to 9,783.50 and Shenzhen composite added 0.93% to around 1,651.63.

Other major markets in Asia Pacific saw gains on the day.

The Nikkei 225 in Japan surged 2.12% to close at 21,085.94, while the Topix saw gains of 1.84% to finish its trading day at 1,534.46.

Over in South Korea, the Kospi closed 0.82% higher at 2,004.75. Australia's S&P/ASX 200 added 0.92% to end its trading day at 6,613.20 as majority of the sectors saw gains.

Overall, the MSCI Asia ex-Japan index gained 0.84%.

Asia-Pacific Market Indexes Chart

Elsewhere in Europe, lawmakers in the United Kingdom defeated British Prime Minister Boris Johnson in parliament on Wednesday, moving to prevent him from taking the country out of the European Union without a formal agreement on October 31.

China says US agrees to meet for talks

U.S. futures jumped during Asia hours on the back of news that for another round of negotiations.

As of 4:05 a.m. ET Thursday, futures rose 195 points, pointing to an implied opening gain of 203.53 points. Futures on the S&P 500 and Nasdaq both also pointed to opening gains.

China's Commerce Ministry had issued a statement on Thursday morning saying that Liu He, China's top negotiator on trade, spoke with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.

The two sides agreed to hold another round of trade negotiations in Washington, D.C., towards the beginning of next month, and consultations will be made in mid-September in preparation for the meeting, the statement said.

Currencies and oil

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 98.352 after weakening from levels above 98.8 yesterday.

The Japanese yen, often seen as a safe-haven currency in times of turmoil, traded at 106.49 after easing from levels below 105.9 yesterday. The Australian dollar changed hands at $0.6810 after rising from the $0.681 handle in the previous session.

Oil prices were mixed in the afternoon of Asian trading hours, with international benchmark Brent crude futures trading slightly higher at $60.70 per barrel and U.S. crude futures declining 0.13% to $56.26 per barrel.

— CNBC's Fred Imbert and Grace Shao contributed to this report.