Tuesday 21 January 2020

Asian stocks ease, dollar near two-week lows on Trump’s Fed criticism

US President Donald Trump. Photo: AP
US President Donald Trump. Photo: AP

Swati Pandey

Asian shares dipped on Monday while the dollar fell after US President Donald Trump criticised the Federal Reserve's monetary policy, and amid reports Japan's central bank could wind back its massive fund purchases.

Trump, on Friday, lamented the recent strength of the US dollar and accused the European Union and China of manipulating their currencies.

The remarks, coupled with new threats to slap duties on all US imports from China, have triggered an equities sell-off with MSCI's broadest index of Asia-Pacific shares outside Japan falling 0.2pc on Monday.

Spreadbetters pointed to a soft start for European shares, extending losses from Friday, while Wall Street futures were a shade weaker with E-Minis for the S&P 500 off 0.1pc.

Japan's Nikkei stumbled 1.3pc, while South Korea's Kospi index slipped 0.8pc.

"It does feel like we are hearing far too much from the President's Twitter account at the moment and the market is not receiving many of his comments well," said Nick Twidale, analyst at Rakuten Securities Australia.

"But...investors are quite rightly positioning themselves accordingly," he added.

"The threat that US policies pose to global growth is considerable and the market will continue to react to presidential tweets and comments while they are coming thick and fast."

Trump's comments against Fed rate hikes eased the greenback and helped steepen the Treasury yield curve.

Also playing a role in the global tick-up in yields and declines in the dollar was a Reuters report that the Bank of Japan was in unusually active discussions to modify its massive easing programme.

The BOJ, in turn, offered to buy an unlimited amount of five- to- 10-year Japanese government bonds on Monday.

Benchmark 10-year JGB futures, which had started lower on Monday, pared some of their losses on the announcement.

The Reuters report and the dollar's weakness together added to the yen's strength, which was last up 0.4pc at 111 per dollar.

The dollar index went as deep as 94.207 on Monday, the lowest in more than two weeks. It was last down 0.1pc at 94.38.

Analysts at JPMorgan said these moves, together with a lower greenback and better commodity prices, should be positive for Asian equities. Indeed, Chinese and Hong Kong shares were in positive territory on Monday after a subdued start. The blue-chip index gained 0.5pc while the Hang Seng index was a touch firmer.

"Trade tensions remain a risk, but with an extended period until implementation (of the tariffs) and the next round of escalation, APAC equities are unlikely to respond much to Trump repeating threats already known," JPMorgan added.

Trade Talks

Investors are now looking ahead to an important meeting between Trump and European Commission President Jean-Claude Juncker in the White House where they will discuss potential US tariffs on European goods.

"Trade tensions are likely to remain in the headlines," asset manager Insight Investment, which is owned by BNY Mellon, said in a note.

"It's probably a little too early for the indirect impact of the US-China trade issue to be showing up in the data. Nonetheless, the trade numbers that were released for Singapore and Japan were worse than expected."

In Singapore, for example, exports rose 1.1pc in the year to June compared with expectations of a 7.6pc increase, while electronic exports slipped 7.9pc.

Elsewhere, the euro dithered near a two-week top of $1.1746. It was flat at $1.1727.

In commodities, oil prices were held back by concerns over US-China trade tensions.

US crude was last off 14 cents at $68.12 a barrel after posting its third straight weekly loss. Brent eased 10 cents to $72.97.

Spot gold was barely changed at $1,230.82 an ounce.


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