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Asian markets drift as rally stalls, stimulus row dents optimism
HONG KONG, Sept 18, 2020 (BSS/AFP) – Asian markets were mixed Friday as
investors struggled to reignite the rally that has characterised much of the
past six months, owing to a stuttering economic recovery and US lawmakers’
failure to agree a new stimulus.
With coronavirus showing no sign of easing as fresh spikes around the world
see the reimposition of containment measures including lockdowns, traders are
growing increasingly worried about how long it will take to get back on
track.
Trillions of dollars in government and central bank cash have provided
much-needed support to economies — particularly equity markets — and none
more so than in the United States.
And with the first massive rescue package having run its course and Federal
Reserve monetary policies such as record-low interest rates having limited
effect, pressure is growing on Congress to come up with more help, with the
head of the central bank leading the calls.
But there is little hope Republicans and Democrats are anywhere close to
reaching a compromise after weeks of bickering.
With nearly 30 million Americans receiving government help, observers said
there was growing concern about the impact on the crucial consumer sector
that drives the world’s top economy.
House speaker Nancy Pelosi on Thursday again pledged to press ahead with
talks on a new deal, but said Republicans are unwilling to compromise on the
size.
“We have a massive problem in our country,” she told reporters, while White
House Chief of Staff Mark Meadows said he was “not optimistic” Pelosi would
want to have a “meaningful” conversation if dialogue resumed.
The standoff continues despite Trump calling this week for Republicans to
increase their proposal.
– ‘Significant risks’ –
While the Fed essentially said Wednesday that interest rates would remain
low for at least three years, Tapas Strickland at National Australia Bank
said it disappointed some.
He added that traders “had expected the Fed to show greater willingness to
step in and fill the fiscal void given the US Congress seems unwilling/unable
to agree to a new fiscal package.
“The Democratic leadership are still pushing for a larger package (latest
being $2.2 trillion), while Republicans are divided with many still strident
that any package must be below $1 trillion.”
Matt Miskin, at John Hancock Investments, added there was a need for action
soon as the economic recovery remained “fragile”.
Fed boss Jerome “Powell did not bring up the need for further fiscal
support multiple times (Wednesday) just for the sake of it”, he said.
“Monetary policy has its limits, the lack of fiscal policy support leaves
significant risks to this recovery.”
In early trade, Hong Kong, Shanghai, Seoul, Taipei and Jakarta were all
higher while Tokyo was marginally up.
But there were slight losses in Sydney, Singapore, Wellington and Manila.
On currency markets, the pound faced fresh pressure after the Bank of
England suggested it could adopt a policy of negative interest rates to
kickstart the battered economy.
“Given the looming risk of a no-deal Brexit and the recent resurgence in
Covid-19 cases in the country, investors are also taking the possibility
seriously,” Strickland added.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: FLAT at 23,326.00 (break)
Hong Kong – Hang Seng: UP 0.2 percent at 24,377.42
Shanghai – Composite: UP 0.2 percent at 3,278.34
Euro/dollar: DOWN at $1.1845 from $1.1849 at 2045 GMT
Pound/dollar: DOWN at $1.2948 from $1.2987
Euro/pound: UP at 91.50 pence from 91.23 pence
Dollar/yen: DOWN at 104.84 yen from 104.70 yen
West Texas Intermediate: UP 0.2 percent at $41.03 per barrel
Brent North Sea crude: UP 0.2 percent at $43.38 per barrel
New York – Dow Jones: DOWN 0.5 percent at 27,901.98 (close)
London – FTSE 100: DOWN 0.5 percent at 6,049.92 (close)
BSS/AFP/GMR/0938 hrs