Asian Markets Edge Back after Rout, Pound Struggles
Asian markets ticked higher Tuesday as investors edged back after last week's steep drops, brushing off Donald Trump's latest anti-China salvo, while sterling struggled to bounce back after fears over Brexit trade deal talks.
With New York closed for a public holiday, dealers took a positive lead from Europe and took the opportunity to pick up cheaper stocks.
Despite continued uncertainty about the timetable for economic recovery -- and with no vaccine yet available -- investors remain safe in the knowledge central banks around the world are willing to play backstop and keep monetary policy supportive for years to come.
The wall of cash put up by authorities has been credited with fuelled an incredible surge in world markets from their March troughs, led by tech firms which have benefited from people staying at home during the pandemic.
Last week's harsh sell-off brought that rally to a juddering halt but analysts do not expect a retreat anything like that seen earlier in the year.
"The sell-off provides a stark reminder that with everybody holding on to the same side of the vaccine life-raft, it should not be too unexpected that when the seas turn rough, many will fall into the drink on the first significant starboard list," said Stephen Innes at AxiCorp.
"Still, investors have ample flotation thanks to the Federal reserve, and the fiscal harness would allow them to hurry back aboard with relative ease if they so choose."
Tokyo, Hong Kong, Seoul and Sydney all rallied, while there were also gains in Shanghai, Taipei, Singapore, Jakarta and Wellington.
There was little initial reaction to Trump's warning that he wanted to wind back Washington's economic relationship with China, warning he would stop US firms doing business with the country from winning federal contracts.
"We'll manufacture our critical manufacturing supplies in the United States, we'll create 'made in America' tax credits and bring our jobs back to the United States and we'll impose tariffs on companies that desert America to create jobs in China and other countries," the president said in a White House news conference.
He also said he would "hold China accountable for allowing the virus to spread around the world".
- Trump targets China -
The remarks are Trump's latest outburst against Beijing as he looks to win re-election in November, though observers said that while tensions between the two countries continue, their pledge to stick to the trade pact signed in January has soothed many investors' worries for now.
On currency markets the pound was unable to bounce back from Monday's losses after Prime Minister Boris Johnson revived the prospect Britain will not get a post-Brexit trade deal with the European Union, saying if a deal is not struck by October 15 then there will not be one.
That was followed by reports the government was planning legislation to override parts of the Withdrawal Agreement that would undermine issues relating to Northern Ireland customs and state aid.
The eighth round of negotiations resume this week, with both sides talking increasingly tough and sparking accusations of intransigence and political brinkmanship.
The pound has fallen more than three percent from its recent high struck on September 1 but the general feeling among analysts is that the two sides will resolve their differences eventually.
"The key question for markets is whether the remarks are still mostly brinkmanship as negotiations near the finish line; the mild market reaction suggests markets think so and still sniff a deal," said National Australia Bank's Tapas Strickland.
- Key figures around 0250 GMT -
Tokyo - Nikkei 225: UP 0.5 percent at 23,211.11 (break)
Hong Kong - Hang Seng: UP 0.3 percent at 24,670.54
Shanghai - Composite: UP 0.1 percent at 3,297.11
Pound/dollar: DOWN at $1.3147 from $1.3164 on Friday
Euro/pound: DOWN at 89.78 pence from 89.80 pence
Euro/dollar: DOWN at $1.1803 from $1.1821 at 2100 GMT
Dollar/yen: UP at 106.29 yen from 106.27 yen
West Texas Intermediate: DOWN 1.7 percent at $39.09 per barrel
Brent North Sea crude: FLAT at $42.02 per barrel
London - FTSE 100: UP 2.3 percent at 5,933.12 (close)
New York - Closed for a public holiday