Speculation that the Australian central bank could slash already record-low interest rates has hit the local dollar (STR)

Hong Kong (AFP) – A Shanghai rally led gains across most Asian markets Wednesday as Chinese investors grow increasingly optimistic over trade talks with the US.

With expectations that Washington and Beijing will eventually strike a tariffs deal already baked into equity prices, analysts say officials will need to provide some clarity on progress to give markets another step up.

There are also warnings that with optimism so high, there could be a lot of disappointment if the final deal does not live up to the hype, or the two sides fail to even reach an agreement.

The talk is that high-level negotiations are ongoing in order to pave the way for a signing ceremony between Donald Trump and Xi Jinping later this month.

“A mid-March meeting … remains the expected next step, but if trade representatives are unable to agree on the final terms of implementation and enforcement measures, we could see the trade truce rally fade,” said OANDA senior market analyst Edward Moya.

Still, after a slow start Shanghai closed 1.6 percent higher to build on Tuesday’s rally that came on the back of China’s decision to slash taxes and ramp up spending, as leaders look to pep up the stuttering economy.

Mainland Chinese markets are up more than 20 percent this year thanks to trade hopes and following a series of monetary easing measures to kickstart economic growth, which hit its slowest pace in three decades in 2018.

– Slow growth hits Aussie –

Hong Kong was up 0.2 percent in the afternoon, while Sydney finished 0.8 percent higher after data showed Australia’s economy virtually ground to a halt in October-December owing to tepid household spending and a weakening housing market.

The news has fuelled speculation the central bank will have to cut already record-low borrowing costs, cheering equity markets but sending the Australian dollar tumbling about 0.6 percent against the greenback.

Elsewhere Manila jumped 1.4 percent, Mumbai added 0.4 percent and Taipei gained 0.5 percent, while Wellington edged up 0.2 percent.

However, Tokyo ended down 0.6 percent, Singapore was off 0.1 percent and Seoul fell 0.2 percent.

On currency markets the pound struggled to recover from losses against the greenback after talks between British and EU negotiators failed to hammer out a revised Brexit deal that Prime Minister Theresa May can pass through parliament.

However, observers are optimistic an agreement can be reached and Britain will not leave the bloc without a deal.

“Any deal that is agreed has a higher chance of getting voted through than was the case in January when the deal was shot down by parliament,” said James Hughes, chief market analyst at AxiTrader.

“Brexiteers fearful of Brexit being reversed could be more prone to back May, provided she can get a legal concession” on customs on the Northern Irish border.

– Key figures around 0710 GMT – 

Tokyo – Nikkei 225: DOWN 0.6 percent at 21,596.81 (close)

Hong Kong – Hang Seng: UP 0.2 percent at 29,005.94

Shanghai – Composite: UP 1.6 percent at 3,102.10 (close)

Pound/dollar: DOWN at $1.3142 from $1.3176 at 2140 GMT

Euro/dollar: DOWN at $1.1302 from $1.1308

Dollar/yen: DOWN at 111.79 yen from 111.88 yen 

Oil – West Texas Intermediate: DOWN 39 cents at $56.17 per barrel

Oil – Brent Crude: DOWN 31 cents at $65.55 per barrel

New York – Dow: DOWN 0.1 percent at 25,806.63 (close)

London – FTSE 100: UP 0.7 percent at 7,183.43 (close)

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