Asian Investors Tread Carefully with US Tax Reform in the Balance
Investors in Asia shifted nervously on Friday as Donald Trump's much-hyped tax-cut plans hung in the balance after a plan to push them through hit unexpected hurdles.
The Dow surged to new records on Wall Street as several key Republicans backed the controversial reforms, which the president says will fire up the US economy, fuelling hopes they could reach Trump's desk for signing by year's end.
However, a new projection showing the measure would add $1 trillion to the federal deficit, complicating Trump's argument the cuts would pay for themselves, saw three Republican senators -- Bob Corker, Jeff Flake and Ron Johnson -- withdraw their support until changes were made.
Republicans hold a narrow 52-48 Senate majority and three defectors would kill the bill.
Global equities have rallied this year on the back of hopes for Trump's market-friendly promises of tax cuts, infrastructure spending and deregulation, but analysts warn of a sharp sell-off if the plans fall flat.
Tokyo ended 0.4 percent higher, back near quarter-century highs after reversing early losses thanks to a weaker yen.
Hong Kong fell 0.4 percent, extending its losing run into a fifth day, while Shanghai was marginally up.
Sydney added 0.3 percent and Singapore rose 0.8 percent while Seoul and Wellington were both flat.
- 'Rexit' reports -Most energy firms rose but gains were muted after OPEC and Russia agreed to extend a cap on oil output by a further nine months, until the end of next year.
While the limit provided support for oil prices, the news had already been baked in, and there are also worries that they will not be continued into 2019.
"Basically, the markets did not spike because most of what was announced was expected and factored into the prices," Sukrit Vijayakar, founder of energy consultancy Trifecta Consultants, told AFP.
"The new elements, if any, were that Libya and Nigeria would cap production, but since it did not involve any production cuts, that would not provide the market any fillip," he added.
"The bearish factor, very carefully worded, is that the group would review in June 2018 whether it is necessary to loosen the cuts because the market is too tight. This takes care of the Russian desire to move early on production expansion."
On currency markets, the dollar held steady against its major rivals as dealers track events in Washington but there are worries about further upheaval in the Trump administration with speculation he could replace Secretary of State Rex Tillerson.
"Questions continue to swirl around the Trump administration as 'Rexit' reports, rumours and innuendos emanating from Foggy Bottom (State Department headquarters) brings the administration's credibility into question once again," said Stephen Innes, head of Asia-Pacific trading at OANDA.
The pound held its gains on hopes British and European Union officials are close to a divorce settlement deal over Brexit.
Volatility in the Bitcoin virtual currency continued as it fell to as low as $9,089 at one point, just two days after hurtling to a record above $11,000.
In early European trade, London was flat, Frankfurt rose 0.2 percent and Paris was 0.1 percent lower.
- Key figures around 0820 GMT - Tokyo - Nikkei 225: UP 0.4 percent at 22,819.03 (close)
Hong Kong - Hang Seng: DOWN 0.4 percent at 29,074.24 (close)
Shanghai - Composite: FLAT at 3,317.62 (close)
London - FTSE 100: FLAT at 7,328.45
Euro/dollar: UP at $1.1923 from $1.1900 at 2150 GMT
Pound/dollar: DOWN at $1.3530 from $1.3536
Dollar/yen: DOWN at 112.60 yen from 112.57 yen
Oil - West Texas Intermediate: UP 19 cents at $57.59 per barrel
Oil - Brent North Sea: UP 25 cents at $62.88
New York - DOW: UP 1.4 percent at 24,272.35 (close)