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Asian markets resume rally as pound holds ground ahead of vote
HONG KONG, Jan 15, 2019 (BSS/AFP) – Asian markets on Tuesday rebounded from
the previous day’s sharp losses, with Hong Kong and Shanghai lifted by
Chinese plans to slash taxes to boost the economy, while the pound extended
gains ahead of a crunch Brexit vote.
China’s disappointing trade data on Monday sent shivers through trading
floors as it showed the long-running US tariffs row is beginning to bite.
But dealers got back on the horse, resuming last week’s rally that was
fuelled by optimism that Beijing and Washington will eventually resolve their
differences and the Federal Reserve will pause in raising interest rates.
Tuesday’s gains were helped by a bump in financials after Wall Street giant
Citibank said it provided a positive outlook for its trading environment
ahead of the corporate earnings season, while energy firms were supported by
rising oil prices.
Hong Kong climbed two percent, Shanghai ended up 1.4 percent, with
investors also cheered by news of a range of tax cuts to support the
stuttering economy.
Officials said they had implemented tax and fee reductions worth about 1.3
trillion yuan ($192 billion) in 2018 and that “larger-scale reductions” were
expected this year to aid small businesses and manufacturing.
They are the latest in a series of piecemeal stimulus measures in recent
weeks, including tax cuts for small businesses and easing financial pressures
on banks in order to boost lending.
“Investors have gained confidence as more stimulus moves have emerged and
are expected to be intensively rolled out after the (Lunar New Year
holidays),” said Zhang Gang, a strategist with Central China Securities.
The latest announcement comes a day after a disappointing batch of trade
data and a slew of other figures showing the world’s number two economy
struggling. Next week sees the release of 2018 growth figures that are
expected to be the weakest in almost three decades.
“Tax reduction is almost the only way to boost personal consumption and
private businesses,” which are the main worries in the current slowdown, Wang
Jian, a Shanghai-based economist at Shenwan Hongyuan Group said.
MORE/MR/ 1453 hrs
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“The government is very reluctant to go back to the big stimulus, and
relaxing property policy is unlikely.”
– D-Day for May –
Tokyo gained one percent while Seoul, Singapore, Taipei and Mumbai were
each more than one percent higher. Sydney, Wellington and Jakarta were also
well up.
Still, uncertainty is keeping traders’ feet on the ground, with the US
shutdown — now in its fourth week — beginning to fuel concerns and showing
no sign of ending soon.
The pound continued to rise against the dollar and briefly broke above the
$1.29 mark for the first time since late November ahead of the vote by MPs on
Prime Minister Theresa May’s controversial Brexit deal.
While the plan is expected to be rejected, experts say the margin of loss
will be key. A massive defeat for the government would mean her deal is dead
in the water and the pound could dive to a two-year low of around $1.22.
However, a smaller loss could provide some wiggle room for May to hammer
out a more palatable agreement with her EU counterparts.
For their part, more than 100 members of the European parliament promised
to back a delay to the Article 50 deadline of March 29 for Britain to
formally leave the EU and try to avert an economically damaging no-deal
split.
May on Monday delivered a last-ditch plea to lawmakers to back her deal,
saying they “have a duty to implement the result of the referendum”.
But with her defeat widely expected, opposition Labour leader Jeremy
Corbyn has said he will call for a vote of no confidence in the government,
which could lead to another general election, fuelling more uncertainty.
In early European trade London rose 0.7 percent, Paris gained one percent
and Frankfurt was up 1.2 percent.
– Key figures around 0820 GMT –
Tokyo – Nikkei 225: UP 1.0 percent at 20,555.29 (close)
Hong Kong – Hang Seng: UP 2.0 percent at 26,830.29 (close)
Shanghai – Composite: UP 1.4 percent at 2,570.34 (close)
London – FTSE 100: UP 0.7 percent at 6,903.03
Pound/dollar: UP at $1.289 from $1.2870 at 2100 GMT
Euro/dollar: UP $1.1480 at $1.1469
Dollar/yen: UP at 108.62 yen from 108.17
Oil – West Texas Intermediate: UP 70 cents at $51.21 per barrel
Oil – Brent Crude: UP 82 at $59.81 per barrel
New York – Dow: DOWN 0.4 percent at 23,909.85 (close)
BSS/AFP/MR/ 1453 hrs