HONG KONG: Asian markets fell yesterday following a rout on Wall Street, as investors were bombarded by a “perfect storm” of problems from trade to Brexit that erased the positivity seen at the start of the week.
The glum mood overshadowed hints from Donald Trump at more time to resolve the China-US trade row, as well as soothing comments from China about their desire to push on with a weekend agreement between the world’s top economies.
Trading floors are awash with uncertainty over the agreement Trump hammered out with Xi Jinping to much fanfare – and an initial market rally – in Buenos Aires, with little clarity emerging and the US president shifting his tone.
While he hailed the deal at first, on Tuesday he warned on Twitter “remember, I am a Tariff Man”, adding “When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so”.
Then, in another tweet he left open the door to an extension of the agreement’s 90-day timeline to end the row.
‘While trade war is certainly the number one driver of global risk sentiment, the current meltdown is morphing into a Hydra with familiar points of irritation … coming to a head’.
China’s commerce ministry yesterday called the pact “successful” and said it “will start with the implementation of the specific matters in which consensus has been reached, the sooner the better”, without providing more details.
Concerns are also mounting about the US economy after the difference in yields on two- and 10-year bonds narrowed, suggesting traders are increasingly concerned about longer-term prospects.
The are fears of an “inversion” where short-term yields overtake long-term rates, which in the past has been the precursor to a recession.
The Dow dived 3.1 per cent, S&P 500 tanked 3.2 per cent and the Nasdaq plunged 3.8 per cent.
In Asia Hong Kong plunged 1.6 per cent, Shanghai ended 0.6 per cent lower and Tokyo was down 0.5 per cent.
Singapore shed 0.8 per cent and Seoul was 0.6 per cent off, while Wellington dived one per cent. Sydney slipped 0.8 per cent after data showed the Australian economy grew at a slower pace than expected in July-September. The Australian dollar dived more than one per cent.
In early European trade London fell one per cent, while Paris and Frankfurt were each more than one per cent lower.
The selling “has all the nasty hallmarks that traders typically call the perfect storm,” said Stephen Innes, head of Asia-Pacific trade at OANDA. He said investors “are probably left feeling duped, tricked and maybe even snookered by some ill-advised backslapping comments post-G20”.
“While trade war is certainly the number one driver of global risk sentiment, the current meltdown is morphing into a Hydra with familiar points of irritation … coming to a head,” he added.
The pound continued to struggle on concerns Britain could leave the EU without a deal, which most observers fear could hammer the economy.
Sterling briefly hit a 17-month-low $1.2659 after Prime Minister Theresa May suffered stunning defeats in parliament that highlighted the fight she has in passing her Brexit deal.
If she loses there are expectations she will face a no-confidence vote and a defeat that could force early elections, leaving the country in chaos.
“The pound is on the ropes and looks set for more falls as it seems all but certain Theresa May’s government will fall,” said Neil Wilson, chief market analyst at Markets.com. “A vote of no confidence and fresh general election now seem certainties.”
Oil prices tanked more than one per cent – dragging regional energy firms – after another jump in US inventories and as Saudi Arabia raised questions about the chances of an output cut at a meeting of Opec and non-Opec members this weekend.
Energy Minister Khalid Al-Falih said it was “premature to say what will happen” in Vienna, days after Russian President Vladimir Putin had said the two major producers had agreed to a cap to support prices.
“We need to get together and listen to our colleagues, hear about their views on supply and
demand and their projections of their own countries’ production,” he said.
Crude had surged Monday and Tuesday after Putin’s comments.
“It’s not a good price signal,” Bob Yawger, director of futures at Mizuho Securities USA, told Bloomberg News. -AFP
