Dhaka, Bangladesh
Asian markets cautious after US volatility

Asian markets cautious after US volatility

Business Desk Asian markets were cautiously higher Wednesday, after a volatile session for US equities and as yields on Treasury bonds retreated from a seven-year peak. Tokyo edged up, ending a four-day losing run on bargain buying despite the higher yen’s dampening impact. “After four days of falling… Japanese shares are in a good place for bargain-hunting buys,” Yoshihiro Ito, chief strategist at Okasan Online Securities, said in a commentary. The benchmark Nikkei 225 index was up 0.16 percent, or 36.65 points, at 23,506.04, while the broader Topix index gained 0.16 percent, or 2.74 points, at 1,763.86. SoftBank dropped 5.37 percent to 10,125 yen after the Wall Street Journal reported the Japanese telecom giant and tech investor is discussing taking a majority stake in US co-working start-up WeWork. “The investment could total between $15 billion and $20 billion,” according to the paper, citing sources familiar with the talks. Automakers were lower with Toyota losing 0.38 percent to 6,760 yen and Honda trading down 0.49 percent at 3,207 yen. Olympus was up 1.14 percent at 4,430 yen while market heavyweight and Uniqlo casual wear operator Fast Retailing jumped 2.34 percent to 59,800 yen. Hong Kong added 0.1 percent while Shanghai closed 0.2 percent higher, both moving back into positive territory for a second day after Monday’s sell-off. There were also gains in Mumbai, with markets leaping 1.5 percent after closing at a six-month low on Tuesday, and aviation stocks seeing a boost after domestic media reports that New Delhi may reduce a jet fuel tax. “(Indian) markets will continue to be volatile in the coming days and will offer great long-term buying opportunities,” Soumen Chatterjee, head of research at Guiness Securities, told Bloomberg News. There were gains in other Asian markets, with Taiwan up 0.1 percent, Sydney adding 0.1 percent and Bangkok rising 1.1 percent. But global markets remained cautious on several fronts. Wall Street was set to open flat to weaker, futures showed. There are also concerns over China where the yuan slipped against the dollar for the fifth session out of the past six to approach four-year lows hit in August . The focus is on next week’s semi-annual U.S. report on currencies amid Treasury officials’ comments that recent yuan depreciation has raised concerns in Washington. However, some relief came from U.S. Treasuries where 10-year borrowing costs kept well below a 7-1/2-year peak of 3.261 percent. “We are at some sort of critical moment, a crossroads, for bond and equity markets,” Marie Owens Thomsen, global head of economic research at Indosuez Wealth Management, said noting that while U.S. 10-year yields at 2 percent unequivocally favored equity investment, this was not so above 3 percent. “This January we took out the 2 percent (yield) handle and now we are wondering if we are permanently taking out the 3 percent handle as well. That makes the climate for equities much more challenging,” Owens Thomsen added. She cautioned though that signs of deceleration in world growth and IMF forecast cuts could curb the relentless rise in yields which was partly fueled by buoyant U.S. economic data. The Treasury selloff may have been curbed also after U.S. President Donald Trump complained said the Federal Reserve was going too fast in raising rates. But they rose 1.3 basis points to 3.22 percent on Wednesday, also getting some traction from Europe, where German yields inched up amid fresh concerns in Italy. Italian bond yields pulled off multi-year highs on Tuesday after Economy Minister Giovanni Tria pledged action to restore calm should market turbulence escalate into financial crisis. Yields slipped further after Tria said he expected “collaboration” with the EU on the budget issue. But markets’ pressure has not dissuaded the government from a bigger-than-expected budget deficit; ministers’ comments appear to indicate they are prepared to defy European Union critics. The developments have raised risks of a credit ratings downgrade for the country, with a knock-on effect for Italian banks which are big holders of government bonds. However the banks’ shares received a boost after an EU official told Reuters regulators were “intensely” monitoring Italian banks’ liquidity levels but there was no cause for alarm. “I am not saying Italy is managing the situation in an ideal fashion but at the current junction I don’t think they are anywhere near a position where they can provoke another crisis in Europe,” Owens Thomsen said. Politics were also in focus in Britain where reports of progress between the UK and the EU in negotiating a Brexit deal pushed the pound to 3-1/2-month highs against the dollar. Analysts at Eurizon SLJ Capital said parliamentary approval looked likely for Prime Minister Theresa May’s Brexit deal. The Times newspaper reported 30-40 opposition Labour MPs would back the agreement. “Already significantly undervalued, sterling has upside risks, especially against the euro,” Eurizon SLJ told clients, arguing that $1.55 was “fair value” for the currency. The dollar was flat against a basket of currencies, easing from seven-week peaks after Treasury yields retreated. That allowed emerging currencies, hard hit in recent days, to make tentative gains . The IMF growth forecast cuts weighed on oil prices, pulling them off 4-1/2-year highs above $85, though the market was somewhat supported by Hurricane Michael which has shut nearly 40 percent of crude output in the U.S. Gulf of Mexico. Earlier, US and European markets meandered on Tuesday, with investors nervous after 10-year US Treasury bond yields surged above 3.0 percent and the IMF sounded a cautious note on the global economy. On Wall Street, the Dow closed down 0.2 percent at 26,430.57 with US shares facing another day of pressure over higher interest rates. “Markets continued their tenuous voyage through a pothole-encumbered landscape, dealing with the fragile US-China relations… and Brexit developments providing more ambiguity,” said Stephen Innes, head of Asia-Pacific trading at OANDA. “It’s no wonder investors have a high level of misgivings.” Eyes were fixed on the Chinese yuan amid a backdrop of deepening US-China tensions and a weak yuan, following steps this week from authorities to spur lending in the economy. Last week the yuan hit a 19-month low, with growing fears the currency was sliding towards the psychological milestone of 7 per dollar — a level not seen since the global financial crisis. Traders are also waiting for the latest data around new lending and money supply, which will be closely watched as Beijing strives to support flagging growth. Shares in Chinese internet giant Tencent were down for the ninth straight day, dropping more than 2.6 percent on the back of rumours about a gaming regulatory crackdown — costing the company its place as one of the world’s 10 biggest companies. In London, the FSTE 100 dipped 0.2 percent in early trade to its lowest in six months.(Inputs taken from AFP, Reuters)

Share |