Equities largely advanced on bargain-hunting by investors after several days of losses

Hong Kong (AFP) - Asian markets largely rallied Friday, tracking a rebound on Wall Street, as investors attempted to shrug off lingering US-China trade war fears.

Positive data out of Japan helped drive the Nikkei index up by 0.4 percent, after figures showed the world’s third-biggest economy was growing faster than analysts had predicted.

The stronger-than-expected data showed Japan’s gross domestic product grew 0.4 percent from the previous quarter on robust consumer demand, beating analysts’ median forecast of 0.1 percent.

“The reading of the data itself was not a huge buying peg… but nonetheless it confirmed personal spending could pick up,” said Makoto Sengoku, market analyst at Tokai Tokyo Research Institute.

The Japanese data came a day after China released figures showing that its exports beat expectations to rise in July, even as shrinking imports pointed to weak demand at home.

Hong Kong and Sydney edged up 0.3 percent Friday, while Seoul climbed 0.9 percent. But Shanghai shed 0.3 percent.

European markets, which had advanced on bargain-hunting by investors after several days of losses, fell at the start of trading, with London down 0.3 percent. Frankfurt and Paris each slid 0.4 percent.

Safe haven assets such as bonds, gold and the yen remained in demand, signalling that trade war fears would continue to weigh on markets.

Interest rate cuts by central banks in India, Thailand and New Zealand this week underscored investor anxiety with analysts saying markets believe further cuts are in the offing.

“The current market dynamics are such that the stabilisation of risk assets will remain a function of improvement on the trade front or the Fed turning increasingly more dovish,” said Stephen Innes at VM Markets.

“With a near term trade agreement little more (than) wishful thinking at this stage the markets will lean on the dovish Fed narrative again as a critical circuit breaker to diffuse the markets’ stress overload from escalating trade and currency war tensions,” he added.

- Currency war worries -

Equities were hammered Monday after Beijing allowed the yuan to slide sharply against the dollar following US President Donald Trump’s announcement of fresh tariffs on Chinese goods starting September 1.

But Beijing’s push to stabilise the yuan helped to ease fears of a full-blown currency war on top of an escalating trade war.

That has done little to placate Trump however, with Washington formally branding China a currency manipulator earlier in the week.

On Thursday Trump appeared to call for a weaker US dollar to help American exporters – a move that breaks with decades of US policy.

“As your President, one would think that I would be thrilled with our very strong dollar. I am not!” he said on Twitter.

“The Fed’s high interest rate level, in comparison to other countries, is keeping the dollar high, making it more difficult for our great manufacturers… to compete on a level playing field”, he wrote.

- Key figures around 0700 GMT -

Tokyo - Nikkei 225: UP 0.4 percent at 20,684.82 (close)

Hong Kong - Hang Seng: UP 0.3 percent at 26,048.46

Shanghai - Composite: DOWN 0.7 percent at 2,774.75

London - FTSE 100: DOWN 0.3 percent at 7,265.09 (open)

Pound/dollar: DOWN at $1.2134 from $1.2138 around 2100 GMT

Euro/pound: UP at 92.21 pence from 92.12 pence

Euro/dollar: UP at $1.1189 from $1.1182

Dollar/yen: DOWN at 105.90 yen from 106.06 yen

Brent North Sea crude: UP 18 cents at $57.56 per barrel

West Texas Intermediate: UP 15 cents at $52.69 per barrel

New York - Dow: UP 1.4 percent at 26,378.19 (close)