Asia markets subdued as US-China trade war dominates market focus

A pedestrian walks past an electronic stock quotation board in Tokyo.

Kazuhiro Nogi | AFP | Getty Images

Asia Pacific markets were subdued on Monday morning, with the ongoing trade war between the United States and China set to take the spotlight this week.

Japan's Nikkei 225 gained 0.21% in early trade, while the Topix index rose 0.38%. South Korea's Kospi was in negative territory, declining 0.37%.

In Australia, the benchmark ASX 200 jumped 0.40%.

MSCI's broadest index of Asia-Pacific shares outside Japan was flat.

On the earnings front, Singapore's DBS Bank reported a stronger-than-expected rise in its third-quarter net profit, which jumped 15% year-on-year to 1.63 billion Singapore dollars ($1.19 billion). Its third-quarter net interest income was up 8% to $2.46 billion Singapore dollars.

Last Thursday, trade optimism rose after China's Commerce Ministry said that Beijing had agreed with Washington to lift existing trade tariffs between the two countries in phases.

Hopes of alleviating that trade fight, which has hampered the global growth outlook and created uncertainty for businesses, dampened when U.S. President Donald Trump said Friday he has not agreed to scrap tariffs on Chinese goods.

Both sides are working to sign what the White House has described as a "phase one" trade deal.

"US-China trade tensions will continue to drive currencies this week," currency strategists at the Commonwealth Bank of Australia wrote in a morning note. They said the dollar could "edge higher this week," driven by trade developments and it could potentially diminish expectations for further rate cuts from the U.S. Federal Reserve.

The dollar last traded at 98.355 against a basket of its peers on Friday.

Elsewhere, the Japanese yen changed hands at 109.21 per dollar, weakening from levels below 108.8 that was briefly reached last week. The Australian dollar traded at $0.6857, declining from around $0.6900 from the previous week.

Citi analysts said in a note that they expect at most a "rollback of the September tariffs only along with a suspension of the December tariffs contingent on achieving a Phase 1 deal." The next tariff deadline is Dec. 15.

"We expect a high degree of uncertainty to remain even if a tariff rollback is achieved," the analysts wrote, explaining that investment and financial frictions between the world's two largest economies are likely to continue.

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