Asia stocks get cold shoulder

Dhaka,  Mon,  29 May 2017
Published : 19 Apr 2017, 14:25:06 | Updated : 19 Apr 2017, 15:08:11
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Sterling gets Asia market's vote, stocks cold shouldered

Sterling stole the centre stage in Asia on Wednesday amid speculation Britain's surprise decision to call a snap election could ultimately deliver a more market-friendly outcome in its divorce from the European Union.

Safe-havens stayed in favour as gold and bonds climbed ahead of presidential elections in France and on escalating tensions between the United States and North Korea.

Equities were largely shunned with MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS down 0.6 per cent to the lowest since mid-March.

Japan's Nikkei .N225 managed to steady for the moment, but Shanghai .SSEC extended its recent retreat with a drop of 1.4 per cent. The Chinese market has fallen for four straight sessions on concerns over tighter regulations.

Sterling was just off a six-month top against the dollar having surged when British Prime Minister Theresa May called an early general election for June 8, seeking to strengthen her party's majority ahead of Brexit negotiations.

"We expect that the PM's gamble is likely to buy her more time as well as room for maneuver in the Brexit negotiations as she will depend less on fringe groups in her own party," said Citi's chief global political strategist, Tina Fordham.

"That may reduce the risk of a negotiation failure and thus 'chaotic Brexit', but also of the UK remaining in the Single Market in the long-term or even reversing the decision to leave the EU."

The pound was lording it at $1.2824 GBP= on Wednesday having shattered a months' old trading range with a jump of 2.2 per cent overnight. It also cleared the 200-day moving average for the first time since June, putting the squeeze on a raft of speculative short positions.

Dollar selling spilled out broadly, sending the euro up to a three-week high at $1.0731 EUR=. Against the yen, the dollar was stuck at 108.55 JPY= and near its lowest since November.

The dollar was also undermined by an eroding interest rate advantage as US bond yields dived to five-month lows. Yields on 10-year Treasury paper sank to 2.17 per cent US10YT=RR, a world away from the 2.629 peak seen in March.

A run of disappointing US economic data and doubts the Trump administration will progress with tax cuts have quelled expectations of faster inflation and boosted fixed-income debt.

That, in turn, has taken the steam out of Wall Street. The Dow .DJI fell 0.55 per cent on Tuesday, while the S&P 500 .SPX lost 0.29 per cent and the Nasdaq .IXIC 0.12 per cent.

Goldman Sachs (GS.N) lost 4.7 per cent in the largest daily drop since June after its earnings missed expectations as trading revenue dropped.

In commodity markets, the urge for safety helped lift gold XAU= to $1,287.10 an ounce and back toward Monday's peak of $1,295.42.

Oil prices slipped as US crude stockpiles fell by less than expected and a US government report said shale oil output in May was likely to post the biggest monthly increase in more than two years.

Brent crude LCOcv1 was last down 16 cents at $54.73 a barrel, while US crude CLcv1 fell 12 cents to $52.29. [O/R]

 
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