The global stock rally continued in Asia on Wednesday, with many markets starting with modest gains after strength overnight in the U.S. and Europe.
Still, there were signs of doubt. Japan’s Nikkei NIK, -0.49% was down 0.5%, European averages traded lower and S&P 500 futures ESM8, -0.79% plunged on fresh geopolitical concerns following the index’s 1.7% jump Tuesday.
Chinese President Xi Jinping’s comments Tuesday eased concerns about a trade war and calmed the market, but James Cheo, senior investment strategist at Bank of Singapore, said Wednesday that volatility should persist at least through the end of May ahead of the planned implementation of U.S. trade tariffs.
“Now the ball is in [President Donald] Trump’s court,” he said, adding that the U.S. leader needed to decide whether he will go for a quick win and accept China’s trade concessions or seek a longer fight.
Many Asia-Pacific stock markets were up about 0.5%, though benchmarks in Australia XJO, -0.48% and New Zealand NZ50GR, -0.19% were down slightly as shares in Australia’s big banks pulled back from strong gains Tuesday.
Indexes in China SHCOMP, +0.56% and Hong Kong HSI, +0.55% , which logged gains of as much as 2% the previous day, rose less than 1%.
The moves came as China’s central bank governor said Wednesday at a forum that the daily trading quota for the country’s stock-connect system with Hong Kong’s market will quadruple next month to 52 billion yuan ($8.27 billion) for northbound flows. The current quota, though, isn’t typically met on a daily basis.
Steven Leung, an executive director at UOB Kay Hian, noted that the measure comes ahead of June’s inclusion of some China-listed stocks into benchmarks from global index provider MSCI.
Stock-exchange operator Hong Kong Exchanges & Clearing 0388, +1.46% hit a three-week high at one point.
Leung cautioned the recent strength of Hong Kong stocks, saying he now expects them to pause as geopolitical tensions and trade risks continue to overshadow the market’s outlook. The Hang Seng Index is on pace for its eighth gain in the past 10 trading days.
On the economic front, China released lower-than-expected inflation data for March after consumer prices jumped by the most in four years in February. Some had attributed that increase to holiday impacts. Inflation in China is “not something that investors should be too worried about,” Cheo said.
Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Bank, attributed the soft March data to seasonal factors and said a single month of decelerating inflation won’t persuade China to change its relatively tight monetary-policy bias.
Across the region, energy stocks were strong after oil prices posted their biggest increase in 16 months on Tuesday, climbing more than 3%. Futures CLK8, +0.66% were slightly lower Wednesday in Asia.