Stocks logged modest gains Friday in Asia after a lackluster overnight session on Wall Street ended with the market’s third straight drop. Upbeat comments by Chinese officials helped alleviate worries over progress in resolving the tariff war between the two largest economies.Chinese President Xi Jinping told a visiting delegation on Friday that he hoped to work toward a resolution of the dispute, though Beijing was not “afraid” and would “fight back” if necessary. Japan’s Nikkei 225 index gained 0.3% to 23,112.88, while the Hang Seng in Hong Kong picked up 0.2% to 26,522.81. South Korea’s Kospi edged 0.3% higher to 2,101.96 and the S&P ASX 200 in Australia advanced 0.5% to 6,709.80. The Shanghai Composite index lost 0.6% to 2,886.67. The Sensex in India dropped 0.5% to 40,356.73. Shares rose in Bangkok, Singapore and Taiwan but fell in Jakarta. Overnight, stocks closed modestly lower on Wall Street in the third straight day of declines after a mostly listless day of trading. Losses in technology stocks, companies that rely on consumer spending and other sectors outweighed gains elsewhere in the market. Energy sector stocks were the biggest winners, benefiting from another pickup in crude oil prices. Health care and communication services companies also rose. Investors have turned cautious this week amid concerns that the U.S. and China will fail to make a trade deal before the year is over. This tangled web of trade talk confusion has investors sitting in that all too familiar predicament of trade war limbo, Stephen Innes of AxiTrader.
It does sound positive on the surface, but equity markets remain cautious given the numerous stops and starts, not to mention dead ends these trade discussions have met with. The world’s largest economies have been negotiating a resolution to their trade war ahead of new tariffs set to hit key consumer goods on December. 15. Investors have been hoping for a deal before that happens, as the tariffs would increase prices on smartphones, laptops and many common household goods.
That Dec. 15 deadline on tariffs still weighs on the market, said Quincy Krosby, chief market strategist at Prudential Financial. The market needs a sense that there won’t be an escalation in the trade war. The benchmark S&P 500 index dropped 0.2% to 3,103.54 and is on track to snap a six-week winning streak. The Dow Jones Industrial Average fell 0.2% to 27,766.29. The NASDAQ slid 0.2% to 8,506.21 while the Russell 2000 index of smaller company stocks lost 0.5%, to 1,583.96.
Stocks are likely to remain choppy and risky as long as the trade war and threat of new tariffs looms over Wall Street, said Barry Bannister, head of institutional equity strategy at Stifel.
“We don’t want to see tariffs on consumer goods that get passed on directly to retail purchasers because they’re the last leg on which the economy is standing right now,” Bannister said.
Bannister warned that the market could be in for a significant decline before the end of the year if the U.S. and China can’t make progress. He also said the risk of a larger recession has not disappeared.
Technology stocks took some of the heaviest losses Thursday. Many chipmakers and companies that make hardware rely on China for sales and supply chains. Advanced Micro Devices slid 3.6% and Lam Research fell 3.7%. Consumer product makers also fell broadly. Kraft Heinz dropped 2.7%. In energy trading Friday, benchmark U.S. crude oil lost 39 cents to $58.19 per barrel in electronic trading on the New York Mercantile Exchange. It rose $1.57 to settle at $58.58 a barrel on Thursday. Brent crude oil, the international standard, declined 41 cents to $63.56 per barrel.