Asian Stocks Volatile Ahead of High-Profile US-China Meeting

Asian stocks floundered on Friday as investors sat on edge before a crucial weekend meeting between the US and China that could dictate the course of tense trade war over the coming new year.

MSCI’s broadest index of Asia-Pacific shares outside Japan wobbled between the red and the positive territory in early trade, as more evidence of a showdown in China dampened sentiment. It was last up less than 0.1 percent and has increased 2.7 percent for the week so far, largely reflecting a rebound from a recent sharp selloff.

In Japan, the Nikkei was higher 0.4 percent, while Korean shares slipped 0.2 percent after the country’s central bank lifted its policy interest rate in a widely expected decision.

Chinese blue-chips advanced 0.5 percent in spite of a poll that showed China’s factory growth slowed down for the first time in more than two years in November.

The weak manufacturing growth cemented further the expectations that Beijing will roll out more economic support measures, which is a factor that has helped to prop up battered Chinese stocks recently.

Investors’ focus is now squarely focused on planned talks between Chinese President Xi Jinping and his US counterpart over the weekend on the sidelines of the G20 summit to be held in Argentina.

Victor Huang, who is the head of investment strategy at Guotai Junan International in Hong Kong, said a no-deal outcome could result in “much more volatile” markets next week.

US S&P e-minis crept down 0.06 percent, indicating a weaker Wall Street session on Friday after a mixed overnight performance.

The Dow Jones Industrial Average slipped 0.11 percent. The S&P 500 shed 0.22 percent while the NASDAQ Composite lost 0.25 percent during the previous session.

Further, comments from a US official about the attendance of Peter Navarro, who is a vocal supporter of a tougher stance at China, added to the apprehension ahead of the Trump-Xi meeting.

The mixed signals from Washington about the prospects for a rapprochement with China on trade kept investors on pins and needles.

“Rather than jump at headlines, the market has taken a laid-back approach and prices are treading water until we see the outcome,” analysts at National Australia Bank said during the morning trade.

Australian shares were weak against regional peers, slipping 3 percent as beverage maker Coca-Cola Amatil Ltd, slumped 14.2 percent on a weak outlook for 2019.

“They billed it as another transformational year, which fund managers think means profit growth is not going to be that good,” said Willian O’Loughlin, who is an investment analyst at Rivkin Securities in Sydney.

Worldwide investors were also careful to shift positions significantly as they seek clarity on Federal Reserve policy direction.

The minutes of the most recent Fed policy meeting showed that nearly all officials agreed another interest rate  increase was “likely to be warranted fairly soon.” However, they also left the debate open on when to halt further hikes and how to relay those plans to the public.

The minutes follow the comments from the Fed Chairman Jerome Powell earlier this week that some took as a clue for a dovish shift.