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Asian stock market losses mount amid fears over trade, oil and rates – business live Asian stock market losses mount amid fears over trade, oil and rates – business live
(35 minutes later)
A cocktail of risks are weighing on the markets, says Jasper Lawler of London Capital Group:
Concerns over higher US borrowing costs were the catalyst for last week’s heavy sell off. However, there were plenty of other risk factors which were also dampening sentiment.
Those risk factors, including US- Sino trade tensions, Brexit, Italy’s Budget proposal and now increased political tensions between the US and Saudi Arabia, are set to keep pressure on risk appetite this week.
Good morning from a wet and grisly London.
Last week wasn’t a pretty one for the City - the FTSE 100 fell steadily to a six-month low, while European stock sank to their lowest in 21 months.
And as the rain tips down, there’s little sign of optimism in the markets today.
Germany traders have been rattled by yesterday’s Bavarian state parliament election, which saw the ruling Christian Social Union lose its majority. That’s another blow to Angela Merkel (whose CDU party are partners with the CSU)
There are tensions in Italy too, where the government is expected to approve its new budget, despite complaints from Brussels that it will breach EU fiscal rules.
Yesterday, Italian prime minister Giuseppe Conte announced the budget would be “a change of gear for Italy”. Conte suggests Europe would soften its view, once Rome has explained its growth strategy to them....
But until that happens, investors will fear another episode in the eurozone debt crisis.
Spread-betting firm IG predicts fresh losses in Frankfurt and Milan today:
European Opening Calls:#FTSE 6997 +0.02%#DAX 11496 -0.24%#CAC 5074 -0.44%#MIB 19098 -0.82%#IBEX 8832 -0.79%
The losses continue to mount up on financial markets amid uncertainty across the world about trade, rising US interest rates and now a potential clash between the US and Saudi Arabia over the fate of missing journalist Jamal Khashoggi.The losses continue to mount up on financial markets amid uncertainty across the world about trade, rising US interest rates and now a potential clash between the US and Saudi Arabia over the fate of missing journalist Jamal Khashoggi.
The Saudi tension has sent the price of oil up and it’s also been a rough night for the pound ahead of this week’s crunch Brexit summit with sterling slipping. The yen meanwhile has strengthened a touch against the dollar.The Saudi tension has sent the price of oil up and it’s also been a rough night for the pound ahead of this week’s crunch Brexit summit with sterling slipping. The yen meanwhile has strengthened a touch against the dollar.
Stock markets fell in Asia overnight led by the Nikkei in Japan. It is off 1.85% (not helped by the rising yen). Seoul -0.7%, the Hang Seng -1.24% and Shanghai is off 0.83%.Stock markets fell in Asia overnight led by the Nikkei in Japan. It is off 1.85% (not helped by the rising yen). Seoul -0.7%, the Hang Seng -1.24% and Shanghai is off 0.83%.
The ASX200 in Sydney closed down 0.99%.The ASX200 in Sydney closed down 0.99%.
Futures trade suggests a flat start later today for the FTSE100 while the Dax30 in Germany is seen dropping 0.25%. Wall Street is tipped to fall too.Futures trade suggests a flat start later today for the FTSE100 while the Dax30 in Germany is seen dropping 0.25%. Wall Street is tipped to fall too.
The pound is down 0.3% to $1.31 and €1.135.The pound is down 0.3% to $1.31 and €1.135.
Brent crude is up 1.25% amid Saudi tensions.Brent crude is up 1.25% amid Saudi tensions.
JP Morgan and Ford bosses have joined the boycott of the Future Investment Intiative conference in Riyadh next week in the wake of the Khashoggi affair.JP Morgan and Ford bosses have joined the boycott of the Future Investment Intiative conference in Riyadh next week in the wake of the Khashoggi affair.
China says it faces “uncertainties” but has “plenty of room” for fiscal manoeuvre if thin gs get sticky. Which they nevertheless say they won’t.China says it faces “uncertainties” but has “plenty of room” for fiscal manoeuvre if thin gs get sticky. Which they nevertheless say they won’t.
The US dollar rose against the euro and other currencies. These included the Aussie dollar, a proxy for emerging market sentiment, which slipped to US71.06c from US71.26c on Friday.The US dollar rose against the euro and other currencies. These included the Aussie dollar, a proxy for emerging market sentiment, which slipped to US71.06c from US71.26c on Friday.
I’m signing off now. It’s been an interesting day but it’s time to hand over to Graeme Wearden in London. Thanks for joining us.I’m signing off now. It’s been an interesting day but it’s time to hand over to Graeme Wearden in London. Thanks for joining us.
It will be fascinating to see where the price of oil goes this week. Brent futures have risen 1.255 today to $81.5 a barrel and that could rise to $100 according to one analyst.It will be fascinating to see where the price of oil goes this week. Brent futures have risen 1.255 today to $81.5 a barrel and that could rise to $100 according to one analyst.
Kazuhiko Fuji, senior fellow at the Japanese government thinktank, the Research Institute of Economy, Trade and Industry, said:Kazuhiko Fuji, senior fellow at the Japanese government thinktank, the Research Institute of Economy, Trade and Industry, said:
Oil prices could rise to $100 on worries about Saudi Arabia. People had thought the Saudis will make up for fall in Iran’s output. If they are starting to use oil as their weapon, that will be a whole new chapter.Oil prices could rise to $100 on worries about Saudi Arabia. People had thought the Saudis will make up for fall in Iran’s output. If they are starting to use oil as their weapon, that will be a whole new chapter.
Apologies - I jumpped the gun on the Aussie market. The final settlemtn pushed it deeper into the red to end down 58.6 points, or 0.99%, at 5837.1 points.Apologies - I jumpped the gun on the Aussie market. The final settlemtn pushed it deeper into the red to end down 58.6 points, or 0.99%, at 5837.1 points.
Sears, the venerable US retailer, has gone into administration. It has filed for chapter 11 bankruptcy, according to a filing in a New York court, Reuters reports.Sears, the venerable US retailer, has gone into administration. It has filed for chapter 11 bankruptcy, according to a filing in a New York court, Reuters reports.
The filing says Sears, which once dominated US retailing in the golden age of catalogues, has assets in the range of $1bn to 10bn and liabilities in the range of $10bn to $50bn.The filing says Sears, which once dominated US retailing in the golden age of catalogues, has assets in the range of $1bn to 10bn and liabilities in the range of $10bn to $50bn.
The ASX200 is done for the day. It finishes down 46 points, or 0.79%, at 5,849 points.The ASX200 is done for the day. It finishes down 46 points, or 0.79%, at 5,849 points.
Saudi Arabia has threatened to retaliate against the world economy if western nations impose sanctions or similar if it emerges that the country’s security forces murdered the journalist Jamal Khashoggi.Saudi Arabia has threatened to retaliate against the world economy if western nations impose sanctions or similar if it emerges that the country’s security forces murdered the journalist Jamal Khashoggi.
But what form could Saudi action take? Our business reporter Rob Davies has been looking at the issues and his main points areBut what form could Saudi action take? Our business reporter Rob Davies has been looking at the issues and his main points are
The Saudis have the obvious power to push up oil prices. it’s the world’s biggest producer and reducing output would see prices rise, possibly causing a devastating oil shock to the world economy.The Saudis have the obvious power to push up oil prices. it’s the world’s biggest producer and reducing output would see prices rise, possibly causing a devastating oil shock to the world economy.
Second, the Saudis support thousands of US jobs through their extensive arms imports. Loss of those contracts would damage Donald Trump and he has already flagged that he doesnn’t want to jeopradise those deals for companies such as Boeing and Lockheed.Second, the Saudis support thousands of US jobs through their extensive arms imports. Loss of those contracts would damage Donald Trump and he has already flagged that he doesnn’t want to jeopradise those deals for companies such as Boeing and Lockheed.
Saudi funds are also important to planned US infrastructure development.Saudi funds are also important to planned US infrastructure development.
And it is a key strategic ally in the Middle EastAnd it is a key strategic ally in the Middle East
On the other side of the ledger, the Saudis are relying on western companies to reform the kingdom’s stagnant economy and diversify it away from oil. The growing boycott of next week’s Future Investment Initiative conference in Riyadh (now including JP Morgan and Ford) shows possible leverage. it will be a blow to Prince Mohammed’s prestige if more high-profile names pull out.On the other side of the ledger, the Saudis are relying on western companies to reform the kingdom’s stagnant economy and diversify it away from oil. The growing boycott of next week’s Future Investment Initiative conference in Riyadh (now including JP Morgan and Ford) shows possible leverage. it will be a blow to Prince Mohammed’s prestige if more high-profile names pull out.
You can read Rob’s full piece here:You can read Rob’s full piece here:
We seem to have hit a fairly quiet spot in the trading day.We seem to have hit a fairly quiet spot in the trading day.
The ASX200 in Sydney is down around 1% and is due to close in a few minutes.The ASX200 in Sydney is down around 1% and is due to close in a few minutes.
The Nikkei hasn’t moved from the -1.5% mark for a couple of hours. Ditto the Kospi (-0.5%) and the Hang Seng ( -0.1%). The CSI300 in Shanghai is probably the biggest mover, sliding from positive territory a couple of hours ago to now being off 0.8%.The Nikkei hasn’t moved from the -1.5% mark for a couple of hours. Ditto the Kospi (-0.5%) and the Hang Seng ( -0.1%). The CSI300 in Shanghai is probably the biggest mover, sliding from positive territory a couple of hours ago to now being off 0.8%.
Talking of China, it’s worth revisiting comments by the country’s central bank governor at the close of the IMF meeting in Bali on Sunday.Talking of China, it’s worth revisiting comments by the country’s central bank governor at the close of the IMF meeting in Bali on Sunday.
Yi Gang said China still had plenty of room for adjustment in interest rates and the reserve requirement ratio (RRR) in the face of any negative impact from trade tensions with the United States.Yi Gang said China still had plenty of room for adjustment in interest rates and the reserve requirement ratio (RRR) in the face of any negative impact from trade tensions with the United States.
He admitted China faced “tremendous uncertainties” but was seeking a “constructive solution” to the current trade tensions. “We still have plenty of monetary policy instruments in terms of interest rate policy, in terms of RRR. We have plenty of room for adjustment, just in case we need it,” Yi said, indicating that Beijing feels it has plenty of ammunition to fire up the economy if needed.He admitted China faced “tremendous uncertainties” but was seeking a “constructive solution” to the current trade tensions. “We still have plenty of monetary policy instruments in terms of interest rate policy, in terms of RRR. We have plenty of room for adjustment, just in case we need it,” Yi said, indicating that Beijing feels it has plenty of ammunition to fire up the economy if needed.
He added that he expected GDP to print at least 6.5% on Friday.He added that he expected GDP to print at least 6.5% on Friday.
Chris Weston of Pepperstone in Melbourne has weighed with some commentary, saying things could quite ugly on stock markets if data out of China – inflation, GDP and retail sales – disappoints later in the week.
After last week’s volatility shock to markets, we start the week on a negative tone, with broad weakenss through Asia and the ASX 200 falling out of bed. The weekend news flow has centred on a lack of progress in the Brexit negotiations, a deterioration in Saudi/US relations, which have resulted in a 1.1% rally in crude, and the loss of majority for the CSU party in the German regional elections.
Here are the latest scores, courtesy of IC Markets (although I think they’ve missed the minus sign off the Hang Seng price):
Asia UPDATE: #Nikkei 225 -1.50% #Hangseng 1.03%#KOSPI -0.47%#ASX200 -1.16%#SSEC -0.01%#STI -0.27%#Equities
Summing up nicely, Masayuki Kubota, chief strategist at Rakuten Securities says: “We can’t say the shock is over.”
The pound is set for a volatile few days as the wrangling over Brexit intensifies ahead of the meeting of European leaders starting on Wednesday night. It sits at $1.31 at the moment after losing 0.3% today.
The key issue is how to prevent a hard border between Northern Ireland and the Republic. The EU wants the North to remain essentially bound by EU customs rules but that is facing pushback from Brexiters. Theresa May is hoping a temporary “backstop” can be put in place where the whole country remains in the customs deal for the time being.
(There’s a good explainer here from Daniel Boffey, or Brussels correspondent.)
Meanwhile, former foreign secretary and would-be Tory leader, Boris Johnson, has sounded off again in his Telegraph column. He says the backstop idea should be rejected completely and says the EU is treating the UK “with contempt”:
In presuming to change the constitutional arrangements of the United Kingdom, the EU is treating us with naked contempt. Like some chess player triumphantly forking our king and our queen, the EU commission is offering the UK government what appears to be a binary choice. It is a choice between the break-up of this country, or the subjugation of this country, between separation or submission.
So seems like a good moment to run this brilliant picture of UK foreign secretary Jeremy Hunt and other foreign ministers in the maze at his country retreat Chevening this weekend.
Still with Australia and interesting to note that Shane Oliver, the high-profile chief economist at AMP, has suggested that he might have to revise downwards his forecasts on house prices.
He tweeted on Saturday that the auction results weren’t good but his forecast of a peak to trough fall of 15% out to 2020 remained in place. But he told the AFR that he might hve to rethink that forecast on the downside.
“The risks are skewing to greater than 5% declines per year, which is what I’ve been assuming,” he told the Financial Review on Sunday. “I am thinking about revising down again.”
...Domain auction clearances. Auction sales volumes running down 50% from year ago in both Sydney and Melbourne. All consistent with further falls in home prices ...our forecast remains for top to bottom falls of 15% out to 2020. Risk on downside. #ausecon pic.twitter.com/SY45iIYpzc
In Australia the ASX200 has had a torrid morning. At one point it was down more than 1.5% but it has recovered at bit and is now at 5,829, a fall of 66 points or 1.1%.
The financial sector has been battered amid concern about the impact of the royal commission on the big four and the amount of compensation they will have to pay. Commonwealth is the worst performing, down more than 2%.
There’s also the question of the impact from a deteriorating housing market. According to the AFR this morning, less than half of properties at auction this weekend were sold. That’s a bad outcome during what should be one of the busiest times of the year. Agents are blaming lack of credit for buyers pulling out.
Banks’ share prices have no floor. You have deteriorating housing market which will affect their balance sheets, rising interest rates will do the same. Banks’ share price essentially depends on how bad the bust will be in Oz housing, especially NSW, VIC and WA #ausbiz https://t.co/QFQiohosMy
The Chinese trading day has kicked off.
The Hang Seng is down nearly 1% while the Shanghai Composite is up a fraction.
Another major factor in stock market losses this week has been the prospect of a full-blown US-China trade war. But calls for calm from leaders gathered at the IMF conference in Bali last week seem to have fallen on deaf ears.
The Chinese currency fell again against the dollar today. It’s now at 6.92. That is sure to rattle Washington where there is a widespread view that beijing manipulates the currency to benefit exporters.
China is unlikely to let the yuan weaken past 7 per dollar any time soon, according to market observers https://t.co/1ENWIwgWuB pic.twitter.com/XIJjyL4jFu
In Sunday’s IMF communique, members agreed to debate ways to improve the World Trade Organization so it can better address trade disputes and that countries would “refrain from competitive devaluations and will not target our exchange rates for competitive purposes”.
The latter point address concern that China will allow the yuan to depreciate in order to make its exports more competitive to cope with any downside from US tariffs. Hmm ...
While the Ssudi government has come out fighting on the prospect of US sanctions in the Khashoggi case, the boss of the Saudi-owned Al-Arabiya satellite news network has gone a few steps further.
Turki Aldakhil paints an apocalyptic picture of world affairs if the US tries to get tough on the Saudis. He says the kingdom would respond by slashing oil output and would team up with Russia and stop buying US arms. The US would be “stabbing itself to death”.
Imposing any type of sanctions on Saudi Arabia by the West will cause the kingdom to resort to other options, US President Donald Trump had said a few days ago, and that Russia and China are ready to fulfill Riyadh’s military needs among others. No one can deny that repercussions of these sanctions will include a Russian military base in Tabuk, northwest of Saudi Arabia, in the heated four corners of Syria, Israel, Lebanon and Iraq.
At a time where Hamas and Hezbollah have turned from enemies into friends, getting this close to Russia will lead to a closeness to Iran and maybe even a reconciliation with it.
The list of marquee speakers at the Future Investment Intiative conference in Saudi Arabia next week makes interesting reading because a few of them have now said they will not be going.
Jamie Dimon has pulled out along with the boss of Uber and the editor of the Economist, Zanny Minton-Beddoes, while US treasury secretary Steve Mnuchin is under pressure not to go. Watch this space for more.
The rise in oil prices is gathering pace too.
Brent futures are up 1.3% to $81.54 a barrel.