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Sterling edges down, Asia markets mixed

Sterling edges down, Asia markets mixed

Business Desk The pound retreated from nine-month highs in Asia on Thursday as investors are dogged by Brexit uncertainty, while equities were mixed as a healthy Wall Street lead was offset by more disappointing Chinese economic data. In another night of drama in Westminster, MPs voted against leaving the European Union without a deal, having rejected Prime Minister Theresa May’s agreement with the bloc for a second time. The move sent the pound soaring to highs not seen since June, with most observers warning that a no-deal divorce would hammer the British economy. However, the currency retreated from those highs in Asia, with lawmakers due to vote on whether to extend the March 29 deadline for leaving. May has warned that if MPs do not adopt her pact there could be a lengthy delay to Brexit that would see Britain taking part in European Parliament elections in May. “The Brexit soap opera continued with … parliament voting, as expected, against leaving the European Union without a deal,” said Jeffrey Halley, senior market analyst at OANDA. “Sterling inevitably rose overnight as traders piled into the hope-vs-reality trade.” But he added: “Being irrationally exuberant on the pound could be a dangerous trade at these lofty levels in the short-term. “No one has actually asked the Europeans what they want, and they may yet impose potentially unpalatable conditions as the price of an (exit) extension.” On equity markets Shanghai sank 1.2 percent after figures showed factory output grew slower than forecast in the first two months of the year, while retail sales and investment were broadly in line with expectations. The tepid readings highlighted weakness in the world’s number two economy and reinforced the need for measures by the Chinese government to kickstart growth as the global economy stutters and the US trade war drags on. The “data means the economy will take a longer time to bottom out as industrial production and consumption are still under pressure despite the rebound in investment”, Liu Peiqian, Asia strategist at Natwest Markets PLC, told Bloomberg News. Traders will be keeping a close eye on closing remarks at the annual National People’s Congress on Friday for an idea about leaders’ plans. Elsewhere, Tokyo shares closed lower on Thursday as lingering concerns over the US-China trade dispute and the fate of Brexit weighed on the market in late trade, erasing their early gains. The benchmark Nikkei 225 index edged down 0.02 percent, or 3.22 points, to 21,287.02, while the broader Topix index fell 0.24 percent, or 3.78 points, at 1,588.29. “Japanese shares are expected to rebound, continuing the momentum stemming from gains in US shares,” Okasan Online Securities said in a note. “The market has confirmed that there is solid support around 21,000. It should encourage bargain hunters,” the brokerage said. Players have already factored in the British decision to avoid a no-deal Brexit, Okasan said. UK lawmakers voted to reject a the notion of crashing out of the European Union, which is still due to occur in just over two weeks. They earlier this week rejected the divorce deal negotiated by Prime Minister Theresa May. The dollar stood at 111.17 yen, flat from New York on Wednesday. Overnight, the Dow closed up 0.6 percent, while the S&P 500 and Nasdaq both added 0.7 percent. Among major Tokyo shares, Uniqlo-operator Fast Retailing added 1.48 percent to 54,270 yen. Toyota edged up 0.18 percent to 6,597 yen. Internet investor SoftBank jumped 3.66 percent to 11,045 yen. Hong Kong stocks closed slightly higher Thursday as a positive lead from Wall Street and bargain-buying was offset by Chinese data reinforcing worries about the country’s economy. The Hang Seng Index in Hong Kong edged up 0.15 percent, or 43.94 points, to close at 28,851.39. But the benchmark Shanghai Composite Index sank 1.20 percent, or 36.26 points, to 2,990.69, while the Shenzhen Composite Index, which tracks stocks on China’s second exchange, was 2.31 percent, or 38.28 points, down at 1,618.26. Taipei and Manila closed in the red, though Sydney, Seoul, Singapore and Wellington were in positive territory. Wall Street had provided a positive lead after data showed a pick-up in the US manufacturing sector, while a soft reading on wholesale inflation reinforced expectations the Federal Reserve will not hike interest rates any time soon. With few major catalysts for buying dealers are awaiting fresh developments in the China-US trade talks with President Donald Trump saying he saw a “very good chance” of a deal but added he was in “no rush. I want the deal to be right”. In early trade London and Frankfurt were flat while Paris rose 0.2 percent. Earlier on Wednesday, the British pound recovered strongly as traders were increasingly confident Britain’s exit from the EU will be pushed beyond the current March 29 deadline. Sterling’s rebound came as British lawmakers voted to reject a no-deal exit from the single market — having also this week voted down the deal negotiated by Prime Minister Theresa May. Yet another vote will determine whether London should ask the EU for more time beyond March 29 to sort out its departure from the bloc. “The potential delay of Brexit is what is helping to hold up the pound, but by the same token, the uncertainty is limiting its upside potential,” said Fawad Razaqzada at Forex.com. “If it feels like the UK government is going around in circles, it is because it is,” he added. As the European trading day wore on, the pound rose more than two percent against the dollar on the day. The pound and the FTSE held up even as Britain’s finance minister Philip Hammond slashed the forecast for economic growth this year due to Brexit uncertainty to 1.2 percent, down October’s 1.6 percent forecast. Meanwhile, in New York, investors threw caution to the wind, rallying to new heights for the year despite the Brexit turmoil and US officials’ decision to ground the top-selling aircraft of Dow-member Boeing. Investors also were cheered by economic data showing the US manufacturing sector had a boost in January and wholesale inflation remained tame in February. Shares in Boeing clambered back into the green for the day after President Donald Trump announced the US decision on the 737 MAX aircraft line, rising 0.5 percent to $377.12, putting it up for the first time in three days but still down nearly 11 percent since before Sunday’s deadly crash in Ethiopia. The Dow, where Boeing’s shares are heavily weighted, rose by triple digits, closing up 0.6 percent. The broader S&P 500 and tech-heavy Nasdaq both added 0.7 percent to close at fresh highs for 2019. Analysts said the markets’ indifference to multiple apparent dangers on the horizon — including weakening corporate revenues, a slowing global economy and Brexit — was because central banks had clearly signaled a pause on interest rate increases. “Overall, part of the answer is we have a Fed that has made it clear that they do not expect to raise rates in the short term or mid-term,” Quincy Krosby of Prudential Financial told AFP. “Right now, the market does not see a rate hike this year.” Oil was also well-bid, with the US benchmark WTI contract reaching a multi-month high, driven by falling American stocks and global supply uncertainty.

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