HONG KONG, Aug 29, 2019 (BSS/AFP) – Asian markets sank again on Thursday
as investors grow increasingly pessimistic about the outlook for China-US
trade talks, while a closely watched recession indicator hit a level not seen
since just before the financial crisis.
The pound remained under pressure after Prime Minister Boris Johnson
forced an extended suspension of parliament, heightening the prospect of a
no-deal Brexit and leading to speculation of a snap no-confidence vote.
Wall Street provided a healthy lead but investors in Asia remain on edge
after the weekend’s face-off between China and the US that saw each side
impose tariffs on hundreds of billions of goods and Donald Trump label Xi
Jinping at one point an “enemy”.
While the US president later said top-level officials from Beijing and
Washington had spoken by phone and talks would resume soon, China was
reluctant to confirm this, while analysts warn the strategy is undermining
market confidence.
“At each round of escalation in the US-China trade war, whether that is
new retaliatory tariffs or new sanctions proposals (like cutting Chinese
firms off from the US financial system), investors are growing more and more
uncertain,” said Hannah Anderson, global market strategist at JP Morgan Asset
Management.
“There does not appear to be an off ramp to this path of continued
escalation.”
The row comes against a backdrop of slowing global growth and uncertainty
about the Federal Reserve’s plans for cutting interest rates to support the
US economy.
“The catalyst that can break this market out is clearly a move, forward-
looking, and a clear agreement with China to move forward and stop this
escalation with the trade war,” Brett Ewing, First Franklin Financial
Services chief market strategist, told Bloomberg TV.
“Also, I think the market is looking for a Fed that can get ahead of these
rate cuts instead of just meeting market expectations.”
– Sterling struggles –
In morning trade Hong Kong shed 0.9 percent, Shanghai retreated 0.3
percent and Tokyo was down 0.5 percent by lunch.
Singapore and Seoul were each down 0.3 percent, Sydney, Taipei and
Wellington all dipped 0.1 percent and Manila gave up 0.3 percent.
Investors appear to be readying for a downturn. The yield on two-year
Treasury notes has already fallen below that for 10-year bonds — which is
seen a pointer to recession — and on Wednesday it was at its widest point
since 2007.
Also, the yields on 30-year Treasurys touched a fresh all-time low as
investors bet on longer-term economic weakness.
The shift out of riskier assets lifted the yen against the dollar, while
the greenback was up against higher-yielding currencies such as the Mexican
peso, South African rand, South Korean won and Malaysian ringgit.
The pound struggled to bounce back after Johnson’s shock decision to bring
an end to the parliamentary year and not restart it until mid-October.
Sterling shed one percent initially Wednesday after the news but later pared
some of the losses.
While he said the extended recess was to draw up a full legislative
programme, anti-Brexiters are fuming that it will cut short any time they
could have to debate a plan to avert a no-deal divorce from the EU, with some
calling it a “coup” and the PM a “dictator”.
Arch-leaver Johnson, however, could face a vote of no confidence, which
could lead to another general election and continued uncertainty for the
already struggling economy.
– Key figures around 0300 GMT –
Tokyo – Nikkei 225: DOWN 0.5 percent at 20,377.97 (break)
Hong Kong – Hang Seng: DOWN 0.9 percent at 25,382.18
Shanghai – Composite: DOWN 0.3 percent at 2,884.39
Pound/dollar: DOWN at $1.2205 from $1.2213 at 2100 GMT
Euro/pound: UP at 90.79 pence from 90.67 pence
Euro/dollar: UP at $1.1081 from $1.1076
Dollar/yen: DOWN at 105.87 yen from 106.14 yen
West Texas Intermediate: DOWN 19 cents at $55.59 per barrel
Brent North Sea crude: DOWN 33 cents at $60.16 per barrel
New York – Dow: UP 1.0 percent at 26,036.10 (close)
London – FTSE 100: UP 0.4 percent at 7,114.71 (close)