Atheer – External Sources
Shares faltered and the dollar skidded on Wednesday, as investors fretted over the threat of new US tariffs on Chinese imports, brushing aside data that showed that the Asian economy got off to a solid start in 2018.
Reuters reported that investor appetite for risk was also hit by US President Donald Trump’s move to fire his Secretary of State, reinforcing market uncertainty about Trump’s future policies.
In a sign that the equity market sell-off would extend elsewhere, S&P E-Mini futures ESc1 were down 0.1 percent, while FTSE futures FFIc1 slipped 0.3 percent.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS stumbled 0.7 percent, retreating from a 1-1/2 month high on Tuesday, with the technology sector the biggest drag.
Japan’s Nikkei dropped 0.8 percent. China’s SSE Composite index and the blue-chip CSI 300 fell 0.5 percent each.
The MSCI Asia ex-Japan IT index declined 0.5 percent as Trump sought to impose tariffs on up to $60 billion against information technology, consumer electronics and telecoms.
Large Asian technology stocks such as LG Display (034220.KS), Tencent Holdings (0700.HK) and Taiwan Semiconductor (2330.TW) were all down by more than one percent.
Investors suspect that policymakers who favour protectionism will also seek to use the currency as a trade weapon, if not overtly then through benign neglect.
As news from the United States dominated, the market shrugged off stronger-than-expected data from China which showed the country’s industrial output expanded at a surprisingly faster pace at the start of the year. Fixed asset investment also handily beat forecasts, while retail sales improved from December.
“The latest Chinese economic data is very encouraging. The economy is well placed to weather any increase in US tariff rates. In fact the Chinese statistical bureau is tipping relatively fast growth for both exports and consumption in 2018,” said Craig James, Sydney-based chief economist at CommSec.
Still, investors were inconsolable and followed overnight losses on Wall Street with the Dow off 0.7 percent, the S&P 500 down 0.6 percent and the Nasdaq Composite falling 1.0 percent.
The selling intensified after Trump dismissed Tillerson following a series of public rifts over policy on North Korea, Russia and Iran. He was replaced with loyalist CIA Director Mike Pompeo, with this coming a mere matter of days after the exit of White House economic advisor Gary Cohn, who was a strong proponent of free trade.
“Tillerson’s departure has left some worrying that it provides a green light to those in the office pushing for more protectionist measures,” analysts at ANZ Bank said in a note to clients. “Protectionism is on the rise.”
Tillerson’s dismissal and the risk of new import duties on China coincided with subdued US consumer price data on Tuesday, with annual core inflation meeting expectations at 1.8 percent.
All that put together meant dollar weakness across a basket of currencies, easing somewhat to 106.5 yen.
The yen did dip briefly after minutes of the Bank of Japan’s January meeting showed that most policymakers shared the view that the central bank should persistently pursue powerful monetary easing.
The euro rose overnight to edge towards a recent one-month top of $1.2446. It was last at $1.2405, while the pound was firmer at $1.3989.
In commodities, oil prices were mixed US crude CLcv1 up two cents at $60.73 and Brent LCOc1 fell ten cents to $64.54.
