Asian markets mixed after US rally, pound down on Brexit woes

HONG KONG (AFP) - Asian markets were mixed yesterday as another rally on Wall Street and data indicating a strong US economy were offset by the increasingly tense trade and technology stand-off between China and the United States.

The Brexit saga also moved back into view, with the pound at three-month lows on renewed concerns Britain will leave the EU with no deal as Prime Minister Theresa May tries to push her divorce deal through again.

And oil prices sank as trade worries overshadowed tensions in the Middle East where the US and Iran are growing increasingly hostile.

New York’s three main indexes rose for a third successive day on the back of better-than-expected housing construction data and a dip in US jobless claims, while solid earnings from Walmart and tech firms Cisco Systems and Nvidia reinforced optimism.

The figures boosted sentiment after almost two weeks of volatility sparked by Donald Trump’s threat, and implementation, of higher tariffs on Chinese imports.

The move threw a spanner in the works for high-level China-US talks that seemed to be close to conclusion and led to a retaliation in kind from Beijing, fanning fears of a painful trade war between the economic titans.

Then on Wednesday Trump barred Chinese telecoms firms - effectively taking aim at giant Huawei - from the US market and added it to a blacklist restricting US sales to the firm.
China hit out at the move and warned against further harming trade ties.

But in light of the Wall Street rally, OANDA senior market analyst Jeffrey Halley said investors seem “to have temporarily given up trying to predict the fluid situation that is US-China trade relations and concentrate on the here and now”.

However, Rodrigo Catril at National Australia Bank said it was “hard to get too excited as the news flows on the trade front points to an escalation rather than an ease in tensions”.
He said observers were suggesting the drive against Chinese telecoms companies “effectively means the president has taken the ‘nuclear option’ and it has now moved towards a ‘fully fledged’ tech war with China”.

Hong Kong fell more than one percent and Shanghai tumbled 2.5 percent while Seoul shed 0.6 percent and Taipei dived 0.9 percent with Singapore dropping 0.7 percent.
Tokyo finished 0.9 percent higher, Sydney rose 0.6 percent, Manila soared more than one percent and Mumbai jumped 0.8 percent.

In early trade London fell 0.2 percent, Paris eased 0.3 percent and Frankfurt was off 0.5 percent.

Uncertainty among investors was reflected in a drop in high-yielding, riskier units, with the Chinese yuan at lows not seen since November.

The pound was also under pressure after May said she would set out her timetable for leaving office after her Brexit deal with the EU, which has already been rejected by parliament three times, goes to MPs early next month.