Asian shares were hammered again on Monday as fears of a trade war between the United States and China took their toll, but the safe haven yen came off its highs and U.S. stock futures climbed as investors saw some light at the end of the tunnel.
Global markets were shaken when U.S. President Donald Trump moved to slap tariffs on Chinese goods, on top of import duties on steel and aluminum, prompting a defiant response from Beijing, reports Reuters.
But E-Mini futures for the S&P 500 .ESc1 brushed off the gloom on Monday to leap 0.6 percent on reports the United States and China have quietly started negotiating to improve U.S. access to Chinese markets.
The United States also agreed to exempt South Korea from steel tariffs, imposing instead a quota on steel imports as the two countries renegotiate their trade deal.
“If we do start to hear more favorable news from the U.S. administration and indeed from the Chinese side over the next few trading sessions, then we may see a sharp reversal of the recent moves in the market,” said Nick Twidale, chief operating officer at Rakuten Securities Australia.
The positive headlines were little consolation for Asian shares which were left nursing their wounds.
Japan's Nikkei .N225 trimmed early losses but were still down 0.4 percent. Chinese shares declined about 1.7 percent. SSEC .CSI300
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slipped 0.4 percent for its fourth consecutive day in the red.
The index is headed for its first quarterly decline since late 2016 as the risk of faster U.S. rate rises and a trade war spooked investors who had enjoyed a multi-year bull run.
South Korea's benchmark share index .KS11 rose 0.3 percent, one of only three markets in positive territory. "Protectionism remains a source of volatility and downside risk for equities," analysts at JPMorgan said in a note.
“Asia ex-Japan equity outperformance is in part a function of faster growth and capital inflows - both clearly at risk in a trade war.”