HONG KONG (AFP) – Asian markets mostly turned lower yesterday following a negative lead from Wall Street and Europe, with analysts saying Britain’s shock decision to call a snap election added to global uncertainties.
The pound held onto its gains after Prime Minister Theresa May announced a snap poll for June 8 as she looks to cement a mandate heading into key Brexit talks with her EU counterparts.
The move comes as France prepares for the first round of its presidential elections at the weekend, while Germany is set for a vote this year. Both could have huge implications for the future of the eurozone.
Added to that, said Greg McKenna, chief market strategist at AxiTrader, was the face-off between the US and North Korea and the cooling of relations between Washington and Moscow over the Syria crisis.
May’s announcement “has added another layer of uncertainty for traders”, McKenna added. “It all sounds dire at the moment.”
The news sent the pound surging more than two percent against the dollar, although it dipped slightly yesterday. Stephen Innes, a senior trader at forex firm OANDA, said May’s move “will lessen the likelihood of an unruly Brexit” and mean she could “become less dependent on the periphery elements within her party”.
However, the strong pound hit London stocks the most since last June’s referendum to leave the EU. The FTSE fell 2.5 per cent, while the Dow sank 0.6 per cent on Wall Street.
In early European trade yesterday London and Paris each fell 0.1 per cent but Frankfurt was 0.1 per cent higher.
Hong Kong slipped 0.4 per cent by the close, Shanghai sank 0.8 per cent, Sydney lost 0.6 per cent and Singapore gave up 0.5 per cent. There were also losses in Taipei, Manila and Wellington.
“The market dislikes uncertainty,” said Yutaka Miura, a senior technical analyst at Mizuho Securities.
“Investors had already been a little on edge over the French presidential election, and now the UK general election is creating further uncertainty in Europe,” he told Bloomberg News.
But by the close in Tokyo the Nikkei index was 0.1 per cent up.
Safe-haven assets were holding up as investors fret over the global outlook. Gold is up more than two per cent since Donald Trump ordered missile strikes on a Syrian airbase earlier this month, sparking fears of a possible conflict with Russia which is backing the Damascus regime.
The yen edged slightly lower against the dollar but was still sitting around five-month highs, while yields on safe-bet Japanese government 10-year bonds slipped to zero for the first time since November.