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ASIA-MARKETS-UPDATE
Asian markets retreat after rally as strong yen hits Tokyo
HONG KONG, Jan 10, 2019 (BSS/AFP) – Asian markets mostly turned south
Thursday as investors took a breather after rallying this week on optimism
over China-US trade talks and the Federal Reserve’s softer tone on interest
rates.
There was also growing unease over the US government shutdown, which is
now in its third week, after President Donald Trump walked out of a meeting
with Democrats to resolve the issue, meaning it will likely drag on for some
time to come.
Tokyo led the losses, with exporters hit by a rising yen against the
dollar after minutes from the Fed’s latest policy meeting showed the policy
board happy to slow its pace of rate hikes to prevent a slowdown in the
economy.
Central bankers said they “can afford to be patient” owing to low
inflation and uncertainty about the outlook and while there would likely be
more increases in borrowing costs, it would be a “relatively limited amount”.
The minutes reinforced comments from Fed boss Jerome Powell last week that
there was no “pre-set” plan on rates, which fanned a global market rally.
Fears about rising costs were a key factor in driving equities lower last
year.
They also fuelled a dollar sell-off with the greenback weakening across
the board and the Chinese yuan at its highest level since late August.
While the dollar stabilised against its major peers Thursday, it saw more
losses against higher-yielding currencies, with the new-found optimism
providing a boost to riskier assets.
“I’m happy to see that there was caution in the minutes,” Alicia Levine,
chief strategist at BNY Mellon Investment Management, told Bloomberg TV.
“You want it to be that this is what the (Fed policy board) really
believes, that caution is warranted, that they’re going to be data-dependent,
and there are alternative outcomes that they should be aware of. I take great
comfort in these minutes.”
– ‘Total waste of time’ –
Shanghai closed 0.4 percent off as data showed inflation weakening,
fuelling concerns about the return of deflation that could hurt the economy
and company profits.
MORE/HR/1448
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ASIA-MARKETS-UPDATE 2 LAST HONG KONG
Seoul eased 0.1 percent, while Wellington, Taipei and Mumbai fell, though
Sydney gained 0.3 percent and Singapore rose 0.5 percent.
Hong Kong rose 0.2 percent, extending a rally to five straight days. But
mainland smartphone giant Xiaomi dived 3.6 percent, bringing this week’s
losses to around 17 percent after a six-month lock-up period for some
investors in its IPO came to an end.
The selling has wiped more than $6 billion off its value this week and $14
billion since it listed, with the firm caught in the global tech sell-off as
demand for smartphones wanes.
In early European trade London fell 0.3 percent, Paris slipped 0.6 percent
and Frankfurt was off 0.5 percent.
Despite the broad losses, there is a much happier mood on trading floors,
helped by hopes of a breakthrough in the tariffs spat between the world’s top
two economies.
After three days of talks in Beijing, Chinese officials said negotiators
had “laid the groundwork” to resolve their differences. Trump earlier this
week tweeted his optimism a deal could be struck at some point.
“This outcome is very much in line with broader expectations given this
was a preliminary mid-level US and Chinese trade representatives affair
possibly setting up for a more significant announcement in Davos when
President Trump takes the grand stage” said Stephen Innes, head of Asia-
Pacific trade at OANDA.
Oil prices were also lower Thursday, having surged around five percent
Wednesday in response to confirmation from Saudi Arabia that it would slash
exports of the black gold after an agreement between OPEC and other top
producers such as Russia late last year.
Both main contracts have rallied by more than a fifth since late December,
before which they had dived more than 40 percent since October on supply and
demand worries.
“Confidence in reduced Saudi, Russia and other OPEC+ member shipments, the
positive trade vibes and a weaker US dollar are all contributing to the
rebound,” said National Australia Bank strategist Ray Attrill.
Dealers are keeping tabs on developments in Washington after talks to end
the US government shutdown broke down when Trump stormed out after Democrats
told him they would not fund his Mexican border wall.
He later described the talks with congressional leaders as “a total waste
of time”, meaning several parts of the government remain unfunded with
hundreds of thousands of workers at home unpaid and no sign of an end to the
impasse.
– Key figures around 0820 GMT –
Tokyo – Nikkei 225: DOWN 1.3 percent at 20,163.80 (close)
Hong Kong – Hang Seng: UP 0.2 percent at 26,521.43 (close)
Shanghai – Composite: DOWN 0.4 percent at 2,535.10 (close)
London – FTSE 100: DOWN 0.3 percent at 6,888.53
Oil – West Texas Intermediate: DOWN 63 cents at $51.73 per barrel
Oil – Brent Crude: DOWN 61 cents at $60.83 per barrel
Dollar/yen: DOWN at 107.87 yen from 108.03 at 2200 GMT
Euro/dollar: UP at $1.1556 from $1.1547
Pound/dollar: DOWN at $1.2786 from $1.2796
New York – Dow: UP 0.4 percent at 23,879.12 (close)
BSS/AFP/HR/1450