Asia Markets

Asia Pacific stocks advance amid US-China trade optimism

Key Points
  • Asia Pacific stocks rose on Monday.
  • U.S. Commerce Secretary Wilbur Ross said Sunday that licenses for American firms to sell to Chinese telecommunications giant Huawei will be granted "very shortly."
  • Stocks on Wall Street jumped last Friday, with the S&P 500 reaching yet another fresh record close. The Nasdaq Composite also hit an all-time high.

Shares in Asia Pacific rose on Monday amid optimism on the U.S.-China trade front.

Mainland Chinese shares advanced on the day, with the Shanghai composite up 0.58% to about 2,975.49 and Shenzhen component gaining 0.67% to 9,868.13. The Shenzhen composite also advanced 0.592% to around 1,646.70. In Hong Kong, the Hang Seng index jumped 1.38%, as of its final hour of trading. Shares of life insurer AIA surged more than 2.5%.

Elsewhere, South Korea's Kospi advanced 1.43% to close at 2,130.24, with shares of chipmaker SK Hynix jumping 1.93%.

In Australia, the S&P/ASX 200 rose 0.27% to end its trading day at 6,686.90, with most sectors in positive territory. The heavily weighted financial subindex, however, declined 0.8%. The trading of Westpac shares was halted on Monday after the bank announced the launch of a capital raising following a 16% plunge in its statutory net profit for full year 2019.

September retail sales data from the Australian Bureau of Statistics on Monday showed retail sales rising 0.2% in the month, missing expectations of a 0.5% increase by analysts in a Reuters poll.

Overall, the MSCI Asia ex-Japan index traded 1.09% higher.

Markets in Japan were closed on Monday for a holiday.

US-China trade watch

Investors watched for developments on the U.S.-China trade front amid recent positive developments. U.S. Commerce Secretary Wilbur Ross said Sunday that licenses for American firms to sell to Chinese telecommunications giant Huawei will be granted "very shortly."

Earlier this year, Huawei was placed along with a dozen other Chinese firms on the Commerce Department's entity list over alleged national security concerns.

Ross also provided more details on the status of a deal expected to be signed between U.S. President Donald Trump and Chinese President Xi Jinping. Ross said the agreement could be reached by the two leaders in one of several locations, including Iowa, Alaska, Hawaii or somewhere in China.

The deal was originally anticipated to be inked at this month's Asia-Pacific Economic Cooperation summit in Chile, an event that has since been canceled due to protests in the country.

Last month, the U.S. and China agreed to finalize the first phase of a trade agreement, which includes a pause in tariff escalation and China buying U.S. agriculture products.

"It certainly seems like we're gonna get a deal," Ray Farris, South Asia chief investment officer at Credit Suisse, told CNBC's "Street Signs" on Friday.

Farris said "one of the best indicators" that a "degree of truce" would be reached among the two economic powerhouses could be seen in the People's Bank of China's daily midpoint fix of the yuan against the dollar. China's central bank allows the exchange rate to rise or fall 2% from that number in what is also known as the onshore yuan, which last traded at 7.0232 against the greenback.

Farris said the midpoint fix set by the PBOC has "actually been coming down," after the yuan breached a then closely-watched level of 7 per dollar in early August.

"To my mind, that thing is an indicator of what Beijing thinks about the negotiations because if Beijing thought these negotiations weren't going well and there wasn't gonna be a deal, they'd have no incentive to allow the currency to appreciate," he said.

Still, one strategist sounded caution on the outlook for U.S.-China trade.

"As much as the US-China trade updates continue to point to a Phase 1 deal looking like a certainty, the contentious issues on whether the US will cancel the planned December Tariffs and remove some of the current tariffs in line with China's demands remains an unknown and if the issue is not resolved then a deal could easily collapse," Rodrigo Catril, senior foreign exchange strategist at National Australia Bank, wrote in a note.

Meanwhile, stocks on Wall Street jumped last Friday, with the S&P 500 reaching yet another fresh record close as it gained 1% to 3,066.91. The Nasdaq Composite also hit an all-time high, adding 1.1% to 8,386.40. The Dow Jones Industrial Average closed 301.13 points higher to 27,347.36.

The moves stateside came following much stronger-than-expected U.S. jobs data. The U.S. economy added 128,000 jobs in October, the Labor Department said Friday — despite a decline of 42,000 jobs in the autos sector due to a General Motors strike that has now been settled. Economists polled by Dow Jones had expected a gain of 75,000 jobs.

Currencies and oil

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 97.206 following a decline from highs above 97.8 seen last week.

The Japanese yen traded at 108.30 against the dollar after seeing lows above 109 in the previous week. The Australian dollar changed hands at $0.6922 after rising from levels below $0.684 last week.

Oil prices slipped in the afternoon of Asian trading hours, with international benchmark Brent crude futures 0.21% lower at $61.56 per barrel. U.S. crude futures also dipped 0.23% to $56.07 per barrel.

— CNBC's Emma Newburger and Fred Imbert contributed to this report.