Asian markets cautious as trade tensions weigh, pound holds gains
AFP – Asian investors trod uneasily on Tuesday as concerns over trade and emerging markets drag on confidence but the pound held on to gains after the European Union’s chief Brexit negotiator’s optimistic remarks.
Donald Trump ramped up the China-US tariffs row late last week by threatening to tax all imports from the Asian giant, sending equities further into the red Monday, with Hong Kong and Shanghai taking the brunt of the pain.
While some investors are returning to pick up bargain stocks, the ongoing worry about a possible full-blown trade war between the world’s top two economies is keeping a lid on prices.
Hong Kong and Shanghai each dropped 0.2 percent in early business, while Singapore and Seoul lost 0.1 percent, Manila shed one percent and Taipei gave up 0.3 percent.
However, Tokyo rose one percent by the break as exporters were supported by a weaker yen, while Sydney was up 0.5 percent.
Dealers are also awaiting developments in Argentina, which is holding talks with the International Monetary Fund on accessing bailout cash as it looks to avert an all-out crisis.
The country’s troubles, along with worries in Turkey and South Africa, have led to concerns of contagion in other emerging markets or even the global economy.
– Relief rally –
On currency markets, sterling held up after surging Monday on the back of comments from Michel Barnier that lifted hopes Britain will leave the European Union with some sort of divorce deal.
He said it was "realistic" to expect an agreement within the next eight weeks, with Britain slated to leave early next year.
"Barnier’s optimism helped trigger a sterling relief rally as the markets were buying back volumes of short sterling position," said Stephen Innes, head of Asia-Pacific trade at OANDA, adding that a deal could lead to a possible increase in interest rates.
"This positive shift could have a significant central bank effect over the medium term as it’s thought that a Brexit deal is a big piece of the EU puzzle that has been keeping both Bank of England and the European Central Bank on a defensive back."
However, there is some unease about an ongoing row within the ruling Conservative party over Brexit that is causing uncertainty about Prime Minister Theresa May’s political future.
Emerging markets units remain beaten down, with the Indian rupee around record lows of 72.5 to the dollar and the Indonesian rupiah at 20-year lows.
Australia’s dollar shed 0.3 percent, while the Russian ruble and South African rand were both off 0.2 percent.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 1.0 percent at 22,595.52 (break)
Hong Kong – Hang Seng: DOWN 0.2 percent at 26,573.32
Shanghai – Composite: DOWN 0.2 percent at 2,663.69
Euro/dollar: DOWN at $1.1586 from $1.1596 at 2100 GMT
Pound/dollar: UP at $1.3030 from $1.3026
Dollar/yen: UP at 111.40 yen from 111.18 yen
Oil – West Texas Intermediate: UP six cents at $67.60
Oil – Brent Crude: UP 10 cents at $77.47 per barrel
New York – Dow: DOWN 0.2 percent at 25,857.07 (close)
London – FTSE 100: FLAT at 7,279.30 (close)