SHANGHAI (Reuters) – Asian stock markets rebounded from the 9-month lows on Friday as Chinese stocks rallied on a sell off, but the market outlook remains a week before the first US and Chinese tariffs come into force , bleak.
MSCI's broadest index for the Asia-Pacific Japan outperformed by 1.4 percent, Japan's Nikkei stock index by 0.2 percent and South Korea's KOSPI by 0.5 percent.
Australian equities fell 0.2% and New Zealand shares fell 0.6%.
The European stock markets will rise after Asia's gains. Financial Spreadbetter expect the London FTSE to score 40 points higher, the Frankfurt DAX 88 points and the Paris CAC 36 points more.
"I think there is a lot of unpredictable behavior when it comes to realizing this threat of trade warfare," said Jim McCafferty, director of equity research, Asia excluding Japan at Nomura. "Trump has a habit of making unfair statements, and markets are reacting quite strongly to it."
Shares rebounded in China on Friday after plummeting to a new two-year low on Thursday. While analysts said the jump reflects technical factors, news has helped Beijing facilitate foreign investment cuts on sectors including banks, automobiles, heavy industry and agriculture.
The country's central bank also said Thursday that it would ensure that market liquidity remained "reasonably adequate".
The blue-chip CSI300 Index gained 2.3 percent and the Shanghai Composite Index 2 percent. Despite Friday's gains, the CSI300 and the Shanghai Composite are the two worst performers in the world this year, representing their worst monthly performance since January 2016.
The Hong Kong Hang Seng Index rose 1.5 percent.
Despite the rebound on Friday, analysts downplayed the impact of easing investment curves on broader trading issues.
"This may not be enough to ease current tensions – the US is calling for much greater market access and fairer competition for foreign companies – the list confirms China's stance that it will be opened on its own terms," said Ever Hunght Sun Hung Kai analysts.
Elsewhere in the region, investors continued to focus on world trade concerns as the US ambassador to China said Washington was not convinced that China was ready to make rapid progress on the trade.
The US government will activate US tariffs on $ 34 billion worth of Chinese goods on July 6, which are expected to trigger a tit-for-tat move from Beijing ,
"The trade war issue is coming to a critical crossroads due to the impending introduction of these tariffs," said Shane Oliver, Chief Economist and Head of Investment Strategy at AMP Capital in Sydney.
While the scope of initial tariffs is limited, "investors are worried only that (tariffs) will lead to more retaliation and then escalation," he said.
The US dollar index, which measures the greenback against a basket of six currencies, fell 0.5 percent to 94,895. The currency has risen in recent weeks, helped by the US Federal Reserve's rate hike in June and expectations of further rate hikes this year.
"The continued outflows of high US interest rates are causing consternation," said Oliver. "Obviously, it is pushing up the US dollar and putting pressure on Asian currencies in general, including the renminbi, and that could go further."
The Chinese yuan was trading at $ 6.6444 on Friday, the lowest level since November. It was 6,6161 to the dollar at 0605 GMT.
The dollar rose 0.2 percent against the yen at 110.65. The euro jumped after EU leaders reached an agreement on migration. The single currency rose 0.6 percent to $ 1.1640 at 0605 GMT. Benchmark benchmark 10-year yield rose to 2.8601 percent from its US closing price of 2.847 percent on Thursday
The two-year yield, which rises with traders' expectations of higher Fed funds rates, was 2.5283 percent, compared to a US close of 2.52 percent.
Oil prices came under pressure from the frictions of trading, although conditions on the crude oil market pushed prices down to a high of three and a half years on Thursday.
U.S. Crude oil was 0.3 percent lower at $ 73.26 a barrel. Brent crude was $ 77.84 a barrel.
Gold remained close to six-month lows, buoyed by concerns about trade, interest rate expectations and the strong dollar.
On Friday, spot gold climbed 0.2 percent to $ 1,250.30 an ounce, but still hit the worst monthly performance since November 2016. [GOL/]
Report by Andrew Galbraith; Arrangement of Simon Cameron-Moore