Asia keeps calm as China cools, Brexit news awaited

SYDNEY: Asian markets kept their nerve yesterday as data showed the economy slowed at the end of last year, underlining the urgent need for more stimulus as Beijing wrestles with the United States over trade.

Investors are also waiting to hear British Prime Minister Theresa May’s ‘Plan B’ for Brexit which is due to be presented to parliament later yesterday.

The world’s second-largest economy grew 6.4 per cent in the fourth quarter from a year earlier, as had been expected and matching levels last seen in early 2009 during the global financial crisis.

Yet there were some bright spots with industrial output rising a surprisingly strong 5.7 per cent, while retail sales rose 8.2 per cent in December, from a year earlier.

“Policy makers appear to be weighing up the medium term risks of further debt growth against short term trends – hence the relatively modest stimulatory policy thus far,” said Gerard Bung, a senior economist at NAB.

“They may be data dependent for a couple of quarters to make any large move,” he said.

Markets reacted calmly, with MSCI’s broadest index of Asia- shares outside Japan up 0.2 per cent, after rising 1.6 per cent last week.

Chinese blue chips gained 0.7 per cent.

Japan’s Nikkei added 0.3 per cent, helped by a recent pullback in the yen.

The Australian dollar, often used a liquid proxy for investments, nudged up to US$0.7167.

E-Mini future for the S&P 500 eased 0.2 per cent, though trade was light with the US on holiday.

Spreadbetters pointed to small opening gains for the major European bourses.

Chinese stocks had rallied on Friday on reports US Treasury Secretary Steven Mnuchin discussed lifting some or all tariffs imposed on Chinese imports, a story later denied.

US President Donald Trump said on Saturday there has been progress toward a trade deal with China, but denied that he was considering lifting tariffs.

“Things are going very well with China and with trade,” he told reporters at the White House.

Chinese Vice Premier Liu He will visit the United States on Jan 30 and 31 for the next round of talks with Washington.

Over in Britain, May will return to parliament yesterday to set out how she plans to try to break the Brexit deadlock after her deal was rejected by lawmakers last week.

May told ministers on Sunday she was looking for ways to make the so-called Northern Irish backstop more acceptable to her Conservative Party and Northern Irish allies.

“We expect only incremental changes from ‘Plan A’ given cross-party talks have fallen flat,” analysts at TD Securities wrote in a note.

“Amendments are likely to be introduced all week, with MPs pushing to cancel ‘No-Deal’, introduce a second referendum, and perhaps push for a permanent customs union,” they added.

“May will likely travel to Brussels to seek concessions from the EU.”

The uncertainty kept sterling sidelined at US$1.2867, having briefly been as high as US$1.3000 last week.

The dollar held firm on the yen at 109.61, while the euro was near the floor of its recent trading range at US$1.1375 .

Against a basket of currencies, the dollar was a shade softer at 96.295. — Reuters

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Source: Borneo Post Online

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