The Australian dollar sank more than one percent after a weak inflation reading that has raised the chances of an interest rate cut (STR)

Hong Kong (AFP) – Asian markets mostly rose Wednesday following a record-breaking close on Wall Street that was fuelled by strong earnings from US big-hitters, but investors held back from firing a full-on rally.

The S&P 500 and Nasdaq scaled all-time highs while the Dow came close after a string of better-than-forecast results from the likes of Coca-Cola, Twitter and Lockheed Martin added to a raft of other recent reports that suggest the economy is in rude health.

Markets welcomed “a really great string of earnings reports, most of them outpacing expectations, as well as some pretty good commentary on future estimates from CEOs”, Jim Paulsen, chief investment strategist at Leuthold Weeden, told Bloomberg News.

“There’s quite a bit of positivity carrying this to new highs.”

However, while Asian dealers were generally upbeat they were unable to capitalise on the Wall Street performance, with major indexes shifting in and out of positive territory through the day.

Shanghai finished up 0.1 percent, while Singapore put on 0.2 percent and Sydney jumped one percent as a drop in Australian inflation raised the chances of an interest rate cut by the country’s central bank. The reading sent the Australian dollar plunging more than one percent.

There were also positive performances in Wellington, Taipei, Manila, Mumbai and Bangkok.

However, Hong Kong fell 0.5 percent, while Tokyo finished 0.3 percent off with Seoul 0.9 percent lower.

In early trade, London fell 0.4 percent and Paris shed 0.2 percent but Frankfurt added 0.1 percent.

– Oil prices retreat after rally –

While most equity markets were up, forex dealers were less risky, with the dollar up against most of its peers and higher-yielding units, though the greenback was weaker versus the Japanese yen, which is considered the go-to asset in times of uncertainty.

US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin travel to Beijing next week for another round of high-level talks aimed at resolving their painful tariffs war.

The White House issued a statement saying the latest negotiations “will cover trade issues including intellectual property, forced technology transfer, non-tariff barriers, agriculture, services, purchases and enforcement”, adding that Chinese officials will visit Washington on May 8.

Expectations the talks will eventually end with an agreement between the economic superpowers has helped fire a rally across world markets this year, with the initial row having been the catalyst for a sharp sell-off at the end of 2018.

On oil markets, both main contracts were in retreat a day after hitting six-month highs on the back of news that Washington would end a waiver for several countries from US sanctions on Iran.

Prices had already been surging thanks to hopes for the China-US talks and for an output cap by OPEC and Russia. Unrest in Libya and Venezuela further propped up prices.

There is speculation OPEC kingpin Saudi Arabia could step in to fill the void left in the market by the removal of Iranian crude, which would temper prices.

But SPI Asset Management’s Stephen Innes said Riyadh could baulk at such a move, having opened the taps when the US unveiled sanctions six months ago only to be “hoodwinked” by the waivers.

“If the US is fully committed to their hawkish Iranian pledge… prices will reprice higher as Saudi Arabia appear tentative about increasing supplies, while it is unlikely (US) shale can fill the void quick enough,” Innes said in a note.

“So to what degree oil markets tighten, and how high oil price goes, will now mostly be dependent on the supply response from OPEC+ group.”

– Key figures around 0810 GMT –

Tokyo – Nikkei 225: DOWN 0.3 at 22,200.00 (close)

Hong Kong – Hang Seng: DOWN 0.5 percent at 29,805.83 (close)

Shanghai – Composite: UP 0.1 percent at 3,201.61 (close)

London – FTSE 100: DOWN 0.4 percent at 7,493.68

Euro/dollar: DOWN at $1.1211 from $1.1224 at 2040 GMT

Pound/dollar: DOWN at $1.2925 from $1.2938 

Dollar/yen: DOWN at 111.81 yen from 111.85 yen

Oil – West Texas Intermediate: DOWN 45 cents at $65.85 per barrel

Oil – Brent Crude: DOWN 44 cents at $74.07 per barrel

New York – Dow: UP 0.6 percent at 26,656.39 (close)

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.