LONDON, March 9 (Reuters) - Emerging equities were on track for a solid finish to the week after a new entente between North Korean leader Kim Jong Un and U.S. President Donald Trump lifted Asian stocks but the spectre of protectionism and looming key U.S. jobs data cast a shadow.
In a surprise announcement, Kim committed to “denuclearisation” and offered to hold the first-ever U.S.-North Korea summit - a potentially dramatic breakthrough in the nuclear standoff between Pyongyang and world powers. Trump said he was prepared to meet Kim.
The news saw South Korean stocks rise more than 1 percent and hit a five-week high, putting the index on track for a 2.4 percent weekly gain. Chinese offshore and mainland stocks also added around 1 percent, helping to lift MSCI’s emerging stocks benchmark 0.5 percent, with the index on track for a 1.6 percent on the week.
“Trump has also accepted an unexpected invitation from Kim Jong Un to meet before May this year,” Rabobank analysts said in a note to clients.
“The move itself is positive. Whether the outcome will be positive remains to be seen.”
Investors had also taken some heart from Trump pressing ahead with tariffs, yet offering conditional exemptions for Canada and Mexico and saying other countries could apply for those, raising the hope that a full-blown global trade war could be averted.
Meanwhile markets were cautious ahead of a U.S. February jobs report due later in the day after last month’s data heightened speculation of faster rate U.S. interest rate hikes, sparking a rout in the bond market and hammering world equities.
According to a Reuters poll, hourly earnings growth is expected to increase 0.2 percent increase while headline non-farm payrolls is seen to have expanded by 200,000 jobs.
Markets expect the Fed to raise rates at least three times this year, with higher interest rates across developed markets raising the cost of borrowing for emerging economies.
But currencies put in a more mixed performance, with some still smarting from the Thursday dollar jump. News from Washington helped lift South Korea’s won and Mexico’s peso which both strengthened 0.4 percent on the day.
But South Africa’s rand, Turkey’s lira and Russia’s rouble all weakened against the dollar and look on track for a second or more week of losses.
The Hong Kong dollar extended its slide to hit a fresh 33-year low of 7.8440 per dollar, inching ever closer to the bottom end of its band of 7.75-7.85 per dollar.
Hong Kong markets have been flooded with cash thanks to heavy money printing by global central banks and the currency has been weakening since November alongside a rise in U.S. interest rates, which has widened the gap between local and U.S. yields.
The de-facto central bank said it had no plans to issue bills to prop up the local dollar, but warned it had sufficient fire power to defend the currency if need be.
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