Asian shares were higher in the mid-afternoon on Monday, hitting three-month highs on optimism that the United States and China are close to solidifying a “phase one” trade deal. The gains in Asia came despite Sunday’s comments from Hong Kong’s Financial Secretary Paul Chan that Hong Kong has entered a recession and that Europe’s largest lending bank, HSBC, has reported third-quarter pre-tax profits 18 percent below last year’s numbers, a sign of a significant economic slowdown in the region.
In his statement Chan said that early estimates for third-quarter growth show expectations for a contraction for the second consecutive quarter, which would put the city squarely in recession territory. He said that it will be difficult for Hong Kong to achieve even 0 percent to 1 percent annual growth forecasted due to the riots that have been tormenting the city for the past five months.
Despite these concerns, there are positive signs in the global economy that are propelling stocks higher. More than 81 percent of U.S. companies have beaten Wall Street expectations during the latest earnings season, and the S&P 500 touched above is July 26 record on Friday before settling just below to close the week. In after-hours trading the index has already surpassed its all-time high, and it will likely break new records in the upcoming New York session.
In Asia on Monday, China’s benchmark indexes saw the steepest gains; the Shenzhen Composite was up 1.49 percent as of 2:09 p.m. HK/SIN, and the Shanghai Composite was up 0.81 percent. Hong Kong’s Hang Seng Index was up 0.86 percent, while South Korea’s Kopsi gained 0.27 percent. Japan’s Nikkei 225 gained 0.30 percent, and Australia’s ASX 200 was up a modest 0.02 percent.
Currency Movements
On the currency markets, movements were fairly subdued on Monday as traders wait for data and earnings that will be released later this week. The dollar index was down 0.02 percent to 97.81 .DXY. The greenback gained against the yen, trading up 0.08 percent to 108.73, but it slid 0.07 percent against the euro, to $1.1086. The British pound was unchanged against the dollar.
The week ahead looks to be an exciting one for the markets, with central bank releases out of the U.S., Japan, and Australia.