Asia shares subdued, May's Brexit options eyed after crushing vote defeat

Men stand in front of a stock quotation board outside a brokerage in Tokyo December 19, 2018. — Reuters pic
Men stand in front of a stock quotation board outside a brokerage in Tokyo December 19, 2018. — Reuters pic

TOKYO, Jan 16 — Asian shares took a breather today after rallying the previous day on stimulus hopes, with investors assessing Brexit options after British lawmakers trounced Prime Minister Theresa May’s deal to pull out Britain from the European Union.

MSCI’s broadest index of Asia- shares outside Japan was off a touch, having swung up yesterday after Chinese officials came out in force to signal more measures to stabilise a slowing economy.

The hopes also helped boost Wall Street overnight, though the early session in Asia saw investors tread cautiously.

Australian shares tacked on 0.1 per cent while Japan’s Nikkei lost 0.7 per cent.

May’s crushing loss marks the collapse of her two-year strategy of forging an amicable divorce with close ties to the EU after the March 29 exit.

Investors’ focus is now on a confidence vote on May’s government by lawmakers later today.

Sterling was last trading at US$1.2848 on the dollar, off about 0.1 per cent. It had rallied more than a cent from the day’s lows against the dollar with the sizable defeat for May seen forcing Britain to pursue different options.

“Theresa May was clearly prepared to take that loss on her deal. She seems to have a plan in place for what she’s going to do,” said Nick Twidale, Sydney-based analyst at Rakuten Securities Australia.

Twidale said he expected more volatility across the UK market and in sterling over the coming sessions. “The stumbling block is Europe saying it’s not going to renegotiate on that deal. I’m not so sure that they won’t.”

May’s defeat also fuelled volatility in UK-focused exchange-traded funds. A Tokyo-traded FTSE 100 ETF was down about one per cent today.

In yesterday’s session on Wall Street, the S&P 500 gained 1.1 per cent as technology and internet stocks gained on Netflix Inc’s plans to raise fees for US subscribers.

The S&P 500 communication services index, which includes Netflix and Alphabet Inc, jumped 1.7 per cent, while the technology sector tacked on 1.5 per cent.

The China stimulus hints and dovish remarks by one of the US ’s most hawkish policymakers also helped lift the US market.

Ester George, president of the Federal Reserve Bank of Kansas City and a voting member of the Fed’s policy-setting committee this year, made the case for patience and caution on interest to avoid choking off growth.

Twidale said the cautious policy stance of a growing number of Fed officials is pushing out expectations of a US rate hike to June or possibly even further out to September.

Elsewhere in the currency market, the euro changed hands at US$1.1405, holding steady after giving up nearly half a per cent during the previous session.

Against the Japanese yen, the was down nearly 0.3 per cent at 108.41 yen.

US Treasuries steadied after a choppy overnight session. The yield on benchmark 10-year notes last stood at 2.709, a tad lower from 2.718 per cent at the US close yesterday.

In commodities, oil prices rose about 3 per cent overnight supported by China’s promise of more stimulus. Worries over slowing China demand have been one of the key factors in te recent slide in oil.

US West Texas Intermediate crude futures were last trading 30 cents, or 0.6 per cent, lower at US$51.81 (RM212.25) a barrel. futures were also off 30 cents, down about half a per cent, at US$60.34 a barrel.

Spot was 0.1 per cent higher at US$1,291.30, not far off a seven-month peak of $1,298.60 scaled on 4. — Reuters

Source: The Malay Mail Online

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