Asian shares on defensive, sterling braces for Brexit vote

A man looks at an electronic board showing the Nikkei stock index outside a brokerage in Tokyo, Japan January 7, 2019. — Reuters pic
A man looks at an electronic board showing the Nikkei stock index outside a brokerage in Tokyo, Japan 7, 2019. — Reuters pic

TOKYO, Jan 15 — Asian shares were on back foot today as an unexpected drop in ’s exports heightened worries about the global economy while the British pound braced for a showdown in parliament over the government’s Brexit plan.

MSCI’s broadest index of Asia- shares outside Japan was almost flat in early trade while Japan’s Nikkei fell 0.7 per cent after a market holiday yesterday.

In yesterday’s session on , the S&P 500 lost 0.53 per cent, with the biggest drag coming from a 0.9 per cent fall in technology sector.

Chipmakers, which get a sizable portion of their revenue from China, took a hit, with the Philadelphia SE Semiconductor Index falling 1.6 per cent.

Data yesterday showed China’s exports unexpectedly fell the most in two years in December, while imports also contracted sharply, pointing to further weakness in the world’s second-largest economy in 2019 and deteriorating global demand.

Adding to the gloom were weak industrial output numbers from the euro zone, which showed the largest fall in nearly three years.

The weak data provided a reality check to which had mounted a rally since late last year, propelled in part by hopes Washington and Beijing could reach a deal on trade to avoid further hikes in tariffs.

Meaningful vote

The British pound is likely to steal the limelight later in the day as the Britain’s parliament will vote on Prime Minister Theresa May’s Brexit deal.

Yesterday May urged lawmakers to take a “second look” at her deal ahead of a vote that looks set to reject the agreement.

Such a result could open up the possibilities of a wide range of outcomes, from a disorderly exit from the union to a reversal of Brexit.

“Markets have priced in a rejection of May’s plan and there are many scenarios after that. Still I’d think the most likely outcome is to extend the (March 29) deadline of Brexit,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

Indeed, currency option markets are barely pricing in the chances of sharp moves in sterling.

The pound’s one-month implied volatility stood at 12.5 per cent, above the average for the past year of around 8.8 per cent well off 20-per-cent plus levels seen in the days just before the UK referendum on June 23, 2016.

The pound changed hands at US$1.2866, having hit a two-month high of US$1.2930 yesterday after a report, subsequently denied, that a pro-Brexit faction of lawmakers could support May’s deal.

The euro traded at US$1.1469, consolidating after hitting a 12-week high of US$1.1570 touched on Thursday.

The stood little changed at 108.16 yen,

Oil prices backed off as the weak trade data soured the mood.

US crude futures stood at US$50.69 (RM207.40) per barrel, up 18 cents today but still off Friday’s five-week high of US$53.31. — Reuters

Source: The Malay Mail Online

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