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Asia stocks fall despite Mnuchin’s weekend triage
HONG KONG, Dec 24, 2018 (BSS/AFP) – Asian stocks fell in early trade
Monday despite a weekend call by Treasury Secretary Steven Mnuchin to top US
banking executives aimed at stemming market panic which saw Wall Street
experience its worst week in a decade.
The Dow and the Nasdaq ended Friday with their biggest weekly drop since
the start of the global financial crisis as investors took fright over a
government shutdown in Washington, President Donald Trump’s public feuding
with the Federal Reserve and the US-China trade war returning to the
forefront.
With Tokyo closed for a public holiday on Monday, Hong Kong and Shanghai
set the tone with both exchanges seeing losses in early trading. Sydney was
up slightly while Seoul was down.
Mnuchin spent much of the weekend in damage control mode after multiple
media outlets reported that Trump had privately asked cabinet members if he
has the authority to fire Fed Chairman Jerome Powell.
Last week, the central bank hiked rates, infuriating Trump who has ignored
the traditional respect for the Fed’s independence, calling it “crazy”, “out
of control” and a greater economic threat than China.
Mnuchin denied the reports of Trump seeking Powell’s scalp, tweeting on
Saturday that the president told him: “I never suggested firing Chairman Jay
Powell, nor do I believe I have the right to do so.”
The following day, Mnuchin announced he had called senior executives from
six of the largest American banks to discuss the market turmoil and received
assurances.
“The banks all confirmed ample liquidity is available for lending to
consumer and business markets,” the Treasury said in a statement attached to
a tweet from Mnuchin announcing the calls.
“We continue to see strong economic growth in the US economy with robust
activity from consumers and business,” Mnuchin was quoted in the statement as
saying, adding that he would convene a call with the President’s Working
Group on financial markets later Monday.
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– ‘More panic and fear’ –
Analysts expressed both surprise and alarm at Mnuchin’s Sunday statement,
saying it might do the opposite of calming current jitters.
“Nothing says don’t panic like saying ‘I’m calling the plunge protection
team tomorrow’,” Michael O’Rourke, JonesTrading’s chief market strategist,
told Bloomberg News.
“I honestly think that’s the type of event that’s going to startle markets
and create more panic and fear when it’s meant to create confidence.”
Last week’s turmoil in Washington — which included a government shutdown
that appears likely to last until at least Thursday and the abrupt
resignation of Defense Secretary Jim Mattis — has spooked markets worldwide.
Japan’s Nikkei hit a fresh 15-month low on Friday with its fourth
consecutive day of losses, while European bourses were flat or rising
slightly.
Oil inched higher in Asian trade after crude-producing nations said they
expect prices will arrest their recent slide and rebalance early next year,
when a deal on new production cuts takes effect.
However, analysts said prospects for a global economic slowdown in the
coming year — which would weaken crude demand — and rising US shale output
are dampening sentiment and limiting any rebound from the current 15-month
lows.
Prices have plunged by around 40 percent from four-year peaks reached in
early October on concerns about oversupply and weaker demand.
In foreign exchange markets, the yen rose 0.2 percent to 111.02 per
dollar, the euro was up 0.1 percent at $1.1379 and the pound was at $1.2658,
a 0.1 percent rise.
– Key figures around 0300 GMT –
Tokyo – CLOSED
Hong Kong – Hang Seng: DOWN 0.7 percent at 25,572.89
Shanghai – Composite: UP 0.2 percent at 2,520.58
Euro/dollar: Flat at $1.1378
Dollar/yen: UP at 111.03 yen
Pound/dollar: UP at $1.2658
Oil – West Texas Intermediate: UP 43 cents at $46.02 per barrel
Oil – Brent Crude: UP 55 cents at $54.37 per barrel
New York – Dow: DOWN 1.81 percent at 22,445.37 (close)
London – FTSE 100: UP 0.1 percent at 6,721.17 (close)
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