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Asian markets head down with Fed rates set to rise more
HONG KONG, Oct 18, 2018 (BSS/AFP) – Asian markets resumed their downtrend
on Thursday as investors contemplated more interest rate hikes by the Federal
Reserve, while Washington added to China-US frictions and Brexit negotiators
struggle to find common ground.
The broad rally across world markets in the middle of the week that was
fuelled by upbeat earnings gave way to ongoing uncertainty about the global
outlook.
Minutes from the Fed’s latest policy meeting showed board members expect
to hike borrowing costs as the world’s top economy goes from strength to
strength and inflation picks up.
However, some members highlighted the chances of further instability among
emerging markets, which have been battered in recent months by a flight of
capital to the US and fuelling concerns of contagion that could throw the
global economy off track.
The minutes sent the US dollar higher on Wednesday and it held its gains
in Asian trade against its peers, while high-yielding and emerging market
currencies were deep in the red.
All three main Wall Street indexes ended negative — a day after chalking
up their best day in more than six months — with below-par earnings denting
sentiment.
And in Asia Tokyo ended the morning 0.5 percent lower, while Sydney lost
0.1 percent, Seoul fell 0.6 percent and Singapore shed 0.5 percent.
Hong Kong, which returned after a one-day break to play catch-up with
Wednesday’s rally, was flat.
Shanghai dived 1.7 percent as already strained relations between China and
the US took another hit after the White House said it plans to withdraw from
an international treaty on postal rates in a move aimed at pressuring
Beijing.
– Trump ‘has gone postal’ –
The move was pushed by top advisor Peter Navarro, according to The New
York Times. Navarro has encouraged Donald Trump to crack down on China on a
variety of trade and political questions that he has argued are
disadvantaging the US.
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The “president has gone postal, escalating US-China tensions and a
stronger dollar will pose considerable headwinds to local equity markets”,
warned Stephen Innes, head of Asia-Pacific trading at OANDA.
“Unlike yesterday’s rally where participation was relatively light, early
volumes are looking robust, suggesting investors continue to probe markets
downside where more significant tail risk remains.”
Also Wednesday, Treasury Secretary Steven Mnuchin refused to call China a
currency manipulator but raised concerns about the yuan’s fall and Beijing’s
exchange practices.
“Of particular concern are China’s lack of currency transparency and the
recent weakness in its currency,” he said in releasing a twice-yearly report
to Congress on how countries manage exchange rates and trade.
The pound continued to struggle after British Prime Minister Theresa May’s
Brexit speech to counterparts at a Brussels summit fell flat, with the two
sides at a impasse over the fate of the Irish border.
Antonio Tajani, the president of the European Parliament, said May offered
them “nothing substantially new” to discuss when they retired for dinner
afterwards without her.
However, there was some hope as May considers an offer from EU negotiator
Michel Barnier to add a year to the 21-month post Brexit transition period,
which would provide more time to hammer out a solution to the border
question.
On oil markets both main contracts extended Wednesday’s sharp losses that
came on the back of data showing a jump in US stockpiles, which overshadowed
the brewing crisis in Saudi Arabia over the disappearance of journalist Jamal
Khashoggi.
– Key figures around 0250 GMT –
Tokyo – Nikkei 225: DOWN 0.5 percent at 22,720.88 (break)
Hong Kong – Hang Seng: FLAT at 25,468.04
Shanghai – Composite: DOWN 1.7 percent at 2,519.17
Euro/dollar: DOWN at $1.1497 from $1.1501 at 2100 GMT
Pound/dollar: DOWN at $1.3096 from $1.3117
Dollar/yen: DOWN at 112.55 from 112.59 yen
Oil – West Texas Intermediate: DOWN 14 cents at $69.61 per barrel
Oil – Brent Crude: DOWN 18 cents at $79.87 per barrel
New York – Dow Jones: DOWN 0.4 percent at 25,706.68 (close)
London – FTSE 100: DOWN 0.1 percent at 7,059.40 (close)
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