HONG KONG (AFP) – Asian investors trod uneasily yesterday as concerns over trade and emerging markets dragged on confidence but the pound held on to gains after optimistic remarks from the European Union’s (EU) chief Brexit negotiator.
Donald Trump ramped up the China-US tariffs row late last week by threatening to tax all imports from the Asian giant, sending equities further into the red on Monday.
While some investors are returning to pick up bargain stocks, ongoing worry about a possible full-blown trade war between the world’s top two economies is keeping a lid on prices.
Hong Kong fell 0.7 per cent and is now more than 20 per cent from its record touched in January, putting it in a bear market. Shanghai ended down 0.2 per cent around lows not seen since January 2016.
Singapore lost 0.4 per cent and Seoul dropped 0.2 per cent. Manila shed more than one per cent.
However, Tokyo rose 1.3 per cent as exporters were supported by a weaker yen, Sydney was up 0.6 percent and Wellington surged two per cent.
In early European trade London fell 0.2 per cent but Paris added 0.1 per cent and Frankfurt rose 0.2 per cent.
Dealers are also awaiting developments in Argentina, which is holding talks with the International Monetary Fund on accessing bailout cash as it looks to avert an all-out crisis.
The country’s troubles, along with worries in Turkey and South Africa, have led to concerns of contagion in other emerging markets or even the global economy.
On currency markets, sterling held up after surging on Monday on the back of comments from EU Brexit negotiator Michel Barnier that lifted hopes Britain will leave the bloc with some sort of divorce deal. The euro also made gains against the greenback.
He said it was “realistic” to expect an agreement within the next eight weeks, with Britain slated to leave early next year.
“Barnier’s optimism helped trigger a sterling relief rally as the markets were buying back volumes of short sterling position,” said head of Asia-Pacific trade at OANDA Stephen Innes, adding that a deal could lead to a possible increase in interest rates.
“This positive shift could have a significant central bank effect over the medium term as it’s thought that a Brexit deal is a big piece of the EU puzzle that has been keeping both Bank of England and the European Central Bank on a defensive back.”
However, there is some unease about an ongoing row within the ruling Conservative party over Brexit that is causing uncertainty about Prime Minister Theresa May’s political future.
Emerging markets and higher-yielding units remain beaten down, though most were slightly up yesterday. The Indian rupee added 0.2 per cent but is wallowing near record lows against the dollar.
The Russian ruble rose 0.4 per cent and South African rand climbed 0.6 per cent, while the Mexican peso, South Korean won and Thai baht were also higher.