Asian markets build on gains, dollar faces further weakness

An employee of a bank counts US dollar notes at a branch in Hanoi, Vietnam May 16, 2016. (Reuters)
Updated 03 January 2018
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Asian markets build on gains, dollar faces further weakness

HONG KONG: Asian equities continued their positive start to the year on Wednesday following yet another record close on Wall Street, but the dollar faced further selling pressure.
Analysts warned global markets could face an uncertain year as Donald Trump’s tax cuts have already been priced into valuations, while central banks are also on course to start winding back on their years of cheap money.
Investors have kicked 2018 off in buoyant mood as the world economy stirs to life and jobs creation, particularly in the US, picks up.
After Tuesday’s broad advances, Asia was given a strong lead from Wall Street where technology firms were the standout performers with Apple, Amazon and Google-parent Alphabet all gaining close to two percent.
The tech-rich Nasdaq and the S&P 500 ended at all-time highs while the Dow ended just shy of a new record.
Hong Kong ended the morning 0.3 percent higher and Shanghai added 0.9 percent, while Sydney gained 0.1 percent and Singapore put on 0.4 percent.
Seoul rose 0.3 percent, Wellington was 0.2 percent higher and Taipei jumped 0.8 percent. Tokyo was closed for a public holiday.
Tech firms were among the big winners, with AAC Technologies up three percent in Hong Kong, adding to Tuesday’s 7.5 percent jump, while Tencent rose two percent. Samsung climbed one percent in Seoul.

Winding down stimulus

Greg McKenna, chief market strategist at AxiTrader, warned: “The punchbowl is going to be taken away this year and for the first year in many neither the Federal Reserve nor European Central Bank, and perhaps even the Bank of Japan, will be injecting free cash into the global monetary system.
“It’s a risk that I strongly believe is under appreciated and underpriced in markets at the moment.”
The dollar weakened, with market-watchers pointing to the fact that central banks outside the US would be winding down their stimulus, bringing them into line with the Fed, which has been tightening for more than a year.
The euro was testing three-year highs, while the pound is on course to hit its best mark since mid 2016, which Britain voted to leave the European Union.
“The backdrop for the dollar is just not very good,” Mark McCormick, head of FX strategy for North America at Toronto Dominion Bank, told Bloomberg News. “The global reflation trade is progressing along.”
Oil prices were flat but sitting around two-and-half-year highs as traders keep an eye on events in Iran, where protesters have taken to the streets over economic grievances, fueling concern about the supplies from the crude-rich country.
The unrest has prompted accusations from Tehran of outside interference by the US and Saudi Arabia, and there are worries of an escalation in tensions in the powderkeg region.
“We need to watch what happens because the geopolitical risk is genuinely a factor once more in global oil markets,” said McKenna.
Bitcoin rose more than 10 percent to above $15,000, recovering some of the recent losses fueled by profit-taking in recent days. The cryptocurrency soared 25-fold over 2017 to a record high above $19,500 on December 18 before tumbling to just above $12,000 less than a week later.


Oil prices drop amid surprise jump in US stockpiles

Updated 18 July 2018
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Oil prices drop amid surprise jump in US stockpiles

  • US West Texas Intermediate crude was down 36 cents, or 0.5 percent, at $67.72
  • On the demand-side, intensifying risks over trade tensions between the US and China could drag on the global economic outlook, BMI Research said

TOKYO: Oil prices dropped on Wednesday after an industry group reported that US crude inventories rose last week, defying analyst expectations for a significant reduction.
Brent futures were down 31 cents, or 0.4 percent, at $71.85 a barrel by 0240 GMT. They rose 32 cents to $72.16 a barrel on Tuesday, after earlier touching a three-month low.
US West Texas Intermediate crude was down 36 cents, or 0.5 percent, at $67.72. It settled up 2 cents at $68.08 a barrel the session before, coming off a nearly one-month low.
The benchmarks had steadied after big declines on Monday and last week as supply disruptions in Venezuela came to the fore and as analysts had been forecasting a decline of 3.6 million barrels in US inventories for the week through July 13.
But the specter of oversupply quickly returned, with a rise of more than 600,000 barrels in US crude stockpiles, reported by the American Petroleum Institute late on Tuesday.
Official numbers from the US Department of Energy’s Energy Information Administration are due at 10:30 a.m. EDT on Wednesday.
On the demand-side, intensifying risks over trade tensions between the US and China could drag on the global economic outlook, BMI Research said.
“Despite US-China trade tensions, the economic outlook is broadly positive, but a number of headwinds are emerging, not least a stronger dollar, rising inflationary pressures and tightening liquidity,” BMI said.
“Slowing trade growth will weigh on physical demand for oil, with the shipping, road and air freight sectors an important pillar of demand globally,” BMI said.
One US central banker added her voice late on Tuesday to those sounding caution on trade.
Kansas City Federal Reserve Bank President Esther George said that uncertainty over US trade policy could slow the economy, even if the recently imposed tariffs in and of themselves are too small to have a big impact.
George called trade policy a “significant” downside risk to her outlook for economic growth, even as tax cuts and other fiscal policy is an upside risk.