Asian stocks slip despite US, EU plan to ease trade tensions

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SINGAPORE, July 26, 2018 (BSS/AFP) – Asian stocks erased early gains and
slipped back Thursday as investor relief at US President Donald Trump and the
European Commission chief’s plan to ease trade tensions was offset by
disappointing US earnings.

Trump and Jean-Claude Juncker announced the agreement after talks
Wednesday at the White House, as the two major economies sought to end the
dispute that had rattled markets and sparked fears of an all-out global trade
war.

The plan means Washington will not follow through with a threat to impose
tariffs on autos, which would hurt the dominant German car industry, while
the pair also vowed to look at existing duties on steel and aluminium imposed
by the US, that had angered the EU.

The news sent US stocks surging in the final hours of trading Wednesday,
with the Nasdaq hitting a record high, and Asian bourses initially made gains
at the open Thursday.

But most major exchanges quickly fell into negative territory, with
analysts blaming the lacklustre US results, which included social networking
giant Facebook and major carmakers.

The EU-US deal had given American equities a “late boost”, said Jingyi
Pan, market strategist at trading group IG.

But she added that “the blips in the latest US earnings performances look
to undercut some of these positive inspirations for the Asian region”.

Tokyo was down about 0.1 percent in late morning trade, with speculation
that the Bank of Japan could review its buying of exchange-traded funds to
invest in listed companies at a meeting next week adding to negative
sentiment.

Shanghai was off almost 0.2 percent, Hong Kong was down 0.3 percent and
Sydney was flat.

South Korea bucked the negative trend, rising 0.6 percent, as investors
cheered official data showing that economic growth in the second quarter met
expectations.

– Facebook plunge –

The biggest shock of Wednesday’s results came from Facebook, which
reported a stunningly weak financial outlook that raised fresh concerns for
the company giant as it tries to recover from the impact of data protection
scandals and investigations.

After-hours trade saw Facebook shares plunge by some 21 percent, wiping
out an estimated $130 billion in market value if the slump is confirmed at
Thursday’s market opening.

Ford reported a sharp drop in second-quarter earnings while General Motors
reported a jump in second-quarter profit, but cut its full-year profit
forecast. Fiat Chrysler also reported disappointing results.

In currency markets, the euro firmed after the the EU-US trade
announcement, while the dollar was down. The euro was “benefiting from a
reprieve in the US trade war”, said Stephen Innes, head of Asia-Pacific
trading at Oanda.

Traders were also awaiting a meeting the European Central Bank later
Thursday, although analysts expect the bank to leave unchanged its plans to
end massive stimulus for the eurozone by December.

– Key figures at 0320 GMT –

Tokyo – Nikkei 225: DOWN 0.1 percent at 22,592.23

Hong Kong – Hang Seng: DOWN 0.5 percent at 28,771.69

Shanghai – Composite: DOWN 0.3 percent at 2,893.19

Euro/dollar: UP at $1.1737 from $1.1729

Pound/dollar: UP at $1.3204 from $1.3193

Dollar/yen: DOWN at 110.780 yen from 110.98 yen

Oil – Brent Crude: UP 48 cents at $74.41 a barrel

Oil – West Texas Intermediate: UP 10 cents at $69.40 a barrel

New York – Dow: UP 0.7 percent at 25,414.10 (close)

London – FTSE 100: DOWN 0.7 percent at 7,658.26 (close)

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