Asian shares rise for fourth day on earnings, China stimulus hopes

TOKYO (Reuters): Asian shares extended their recovery into a fourth day on Wednesday, buoyed by strong US earnings and expectations that Beijing will ramp up fiscal stimulus to cushion the impact of its worsening trade dispute with Washington.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.3%, led by Taiwan, while Japan’s Nikkei ticked up 0.4%.

Bucking the trend were Chinese shares, which slipped about 0.4% after the United States said it would begin collecting 25% tariffs on an additional $16 billion worth of Chinese goods this month, the second leg of its first China-targetted tariffs on $50 billion goods.

News that the fresh duties will go into effect from Aug. 23 overshadowed strong Chinese trade data, which showed exports rose more than expected in July despite US tariffs imposed early last month. Imports also rose more than forecast, suggesting its domestic demand remains resilient despite trade war fears.

But losses in China markets were tempered by signs Beijing is unveiling further measures to support growth, such as increasing infrastructure spending and tweaking its monetary policy stance.

On Wall Street, the S&P 500 rose 0.28% to 2,858, which is just 14 points, or about 0.5%, below its record high marked in January.

A strong second-quarter earnings season has fuelled optimism about US economic strength. S&P 500 firms saw a 23.5% rise in their April-June profits, according to Thomson Reuters data.

Against this backdrop, the CBOE volatility index, a measure of investors’ expectation on US share price volatilities and often viewed as a gauge of anxiety in financial markets, fell to a seven-month low of 10.93.

Tesla jumped 11% after Chief Executive Elon Musk said he was considering taking the electric car maker private.

In the foreign exchange market, major currencies kept to tight ranges. The euro was at $1.1599, off Monday’s five-week low of $1.1530.

The yen stood little changed at 111.38 per dollar while worries about a hard Brexit kept the sterling at $1.2938, just above its 11-month trough of $1.2920 set on Monday.

The Chinese yuan was little changed, keeping some distance from its 15-month lows hit last week as the central bank on Friday took steps to curb bets against the currency by raising the cost for investors to short the yuan.

But pressure on the Chinese currency remained strong.

The Turkish lira, the biggest mover in recent days, kept some distance from Monday’s record low, trading at 5.2600 per dollar, versus Monday’s low of 5.425,

Still, it is down almost 7% so far this month on deepening concerns about a rift with the United States and on President Tayyip Erdogan’s influence over the central bank.

Oil prices held firm after US sanctions on Iranian goods went into effect, intensifying concerns that sanctions on Iranian oil, expected in November, could cause supply shortages.

Brent futures stood at $74.65 a barrel, flat on the day but maintaining gains of about 2% so far this week. US West Texas Intermediate (WTI) crude futures traded at $69.25 per barrel, up 0.1% on the day for a gain of 1.1% this week.