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Asia Pacific trade higher amid US-China trade developments

Lisa Micheal 61 Jul 23

Stocks in Asia Pacific traded higher on Wednesday following developments on the U.S.-China trade front.

The Nikkei 225 in Japan traded 0.5% higher in morning trade, while the Topix index added 0.39%.

Over in South Korea, the Kospi recovered from its earlier slip to advance 0.11%.

Shares of Apple supplier LG Display dropped more than 1.5% after the firm reported a larger-than-expected second-quarter operating loss. The company also said it is looking to diversify its supplier base amid the ongoing diplomatic spat between Tokyo and Seoul that has seen Japan place export curbs on important materials to South Korea.

South Korea on Wednesday asked Japan to scrap its plan to remove the former from its so-called white list of minimum trade restrictions.

Wednesday is the deadline for public comment on the Japanese government's plan to remove South Korea from the list, the Nikkei Asian Review reported Tuesday.

Mainland Chinese shares rose in early trade, with the Shanghai composite adding 0.82% and the Shenzhen component gaining 0.78%, while the Shenzhen composite advanced 0.911%. Hong Kong's Hang Seng index also rose 0.82%.

Meanwhile, the S&P/ASX 200 in Australia rose 0.78% as most sectors saw gains.

In corporate news, Japan's Mitsubishi Motor is set to release its earnings for the first quarter later on Wednesday.

Overnight on Wall Street, the Dow Jones Industrial Average closed 177.29 points higher at 27,349.19, while the S&P 500 also gained 0.7% to finish its trading day at 3,005.47. The Nasdaq Composite added 0.6% to close at 8,251.40.

On the trade front, in-person trade negotiations between the U.S. and China will begin next week, sources told CNBC. They said White House officials are looking at a longer-term timeline.

Meanwhile, Boris Johnson is set to be the U.K.'s next prime minister after winning the ruling Conservative Party's leadership race on Tuesday. Johnson has previously stated that the U.K. must leave the European Union by the October 31 deadline "do or die, come what may."

The British pound last stood at $1.243, after seeing a high of $1.248 yesterday.

"In our view, Johnson's desire to push for Brexit, deal or no deal, increases the chance of an early general election and some possibly nasty GBP outcomes," Rodrigo Catril, senior foreign exchange strategist at National Australia Bank, wrote in a note.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 97.737 rising from levels below 97.5 yesterday.

The Japanese yen, widely viewed as a safe-haven currency, traded at 108.23 after weakening from levels below 108.0 yesterday. The Australian dollar was at $0.6979 after declining from levels above $0.702 in the previous session.

Oil prices rose in the morning of Asian trading hours, with international benchmark Brent crude futures gaining 0.38% to $64.07 per barrel, while U.S. crude futures advanced 0.44% to $57.02 per barrel.

Here's a look at some of the data set to be released in the day ahead:

  • Hong Kong: NagaCorp earnings
  • Japan: Leading index at 1:00 p.m. HK/SIN, Line earnings for the second quarter, Mitsubishi Motor earnings for the first quarter

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

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US Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He at the Diaoyutai State Guesthouse in Beijing on Feb. 15, 2019

American trade negotiators will soon head to China for face-to-face talks as the world's two largest economies try to strike a deal, sources told CNBC.

The U.S. officials will travel to China for discussions sometime between Friday — the start of a six-week congressional recess in Washington — and Thursday, August 1.

While the talks represent a critical next step after a truce reached between the countries' leaders in June, a deal is not viewed as near. President Donald Trump has signaled that he'd be willing to relax restrictions on China's Huawei in exchange for purchases of U.S. agricultural products.

Longer-term, U.S. officials have suggested they could roll back the tariffs in exchange for Beijing making the deal legally binding — something it backtracked on in May.

White House officials are now suggesting that getting China to agree to the latter could take several months at least, even though Trump remains inclined to ink an eventual deal, according to three people familiar with the matter.

In the meantime, the administration could shift its focus to ratifying the United States-Mexico-Canada Agreement. Trump sees approving his replacement for the North American Free Trade Agreement as a major economic and political priority.

U.S. Trade Representative Robert Lighthizer is using the remaining days of the congressional session to meet with lawmakers about the deal. CNBC has reported that the White House is expected to send the implementing legislation to Capitol Hill in September, setting up a vote on the deal this fall.

Investors have watched the China talks closely. A widening trade war between Washington and Beijing would risk more damage to American companies and the global economy. 

The Trump administration has put tariffs on $250 billion in Chinese goods — and threatened to put duties on even more products. Beijing has slapped tariffs on $110 billion in American goods. 

Both the U.S. and China have taken steps to deescalate tension in recent days. Trump agreed to make "timely" decisions about whether to allow American tech companies to sell to blacklisted Chinese firm Huawei. 

Meanwhile, Chinese state media reported that China had taken steps to start following through on its promise to buy more U.S. agricultural goods. Trump sees the step as important to reaching an agreement as American farmers take a hit from tariffs on crops. 

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