Asia Markets: Asian markets gain on hopes of averting trade war

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Asia-Pacific shares rose Thursday as investors welcomed signals the U.S. and China are open to negotiations rather than escalating threatened tit-for-tat trade tariffs.

Stocks in Singapore led broad gains across the region, rising 1.7%, with shares in Japan and South Korea up 1%. Markets in mainland China, Hong Kong and Taiwan were closed for holidays.

Market sentiment staged a U-turn overnight, with major U.S. stock indexes swinging to strong gains by the close as fears over China’s plans to impose trade countermeasures against the U.S. gave way to optimism the countries will ultimately reach a compromise. The Dow Jones Industrial Average closed up 1% after a drop of as much as 510 points earlier in the session.

That spurred a strengthening of the dollar, while bonds and gold slid as worries about the risk of a damaging trade war receded.

“China’s retaliation to the second round of U.S. tariff barriers unnerved European traders. However, focus shifted to deferred starts to announced sanctions and the potential for a negotiated solution despite tough talk from both sides,” Michael McCarthy, chief market strategist at CMC Markets in Sydney, said.

Washington’s hard-line stance on trade with Beijing has set the stage for high-stakes negotiations between the world’s two largest economies.

China’s tariffs would place 25% duties on major U.S. exports to China including airplanes, autos and soybeans, covering 106 categories of products and affecting $50 billion of goods. The announcement followed plans by the Trump administration to impose tariffs of 25% on Chinese products worth $50 billion, on top of levies introduced on steel and aluminum last month. Retaliatory Chinese levies on U.S. pork and fruit came into effect early this week.

In Asia, Singapore’s banks drove up the Straits Times Index STI, +2.01%  , while gains on Japan’s Nikkei NIK, +1.63%   were driven by telecom companies, drug firms and real-estate developers. NTT Docomo 9437, +1.04%   was up 1.4%. South Korea’s Kospi SEU, +1.44%   was buoyed by a 1.9% gain in Samsung Electronics 005930, +3.75%   .

Australia’s S&P/ASX 200 XJO, +0.70%   was up 0.4% as financial shares offset weakness among miners, while New Zealand’s benchmark index NZ50GR, -0.24%   lagged behind with a decline of 0.1%.