Asian markets struggle as US stimulus impasse drags on

HONG KONG (AFP) - Asian markets drifted yesterday as investors grew increasingly concerned about the stalemate in Washington on a new stimulus for the world’s top economy.

Hopes that Democrats and Republicans would cast aside their mutual animosity to stump up much-needed cash for struggling Americans have been key to supporting equities for weeks.

But they were dealt a blow Thursday when senators broke up for a summer recess, saying they would not return until early next month, while both sides continued to trade accusations over who was to blame for the impasse.

Democrats have called on Republicans and the White House to double their US$ 1 trillion offer, having reduced their own proposal to US$ 2 trillion from an initial US$ 3.5 trillion.

But Senator Leader Mitch McConnell accused his opponents of pushing for several socialist measures to be introduced into the new bill, describing their tactics as “throwing spaghetti at the wall to see what sticks”.

Still, the expectation remains that an agreement will at some point be found, particularly with an election just over two months away and millions of Americans in financial crisis.

“Congress’ political grandstanding delay is posing some risk for the global recovery,” said Stephen Innes at AxiCorp. “Still, there is no chance of this deal not going through for all the politically tarnishing Frugal Freddy reasons that have been alluded to.

“It is a matter of whether it is US$ 1.5 trillion or US$ 2 trillion, where bigger would be better.”

In early trade, Hong Kong dipped 0.1 percent and Shanghai was flat, while Tokyo ended the morning with small gains and Sydney added 0.5 percent. 

Taipei was marginally higher but Seoul dropped more than one percent, while there were also losses in Singapore, Manila and Wellington.

Traders were given a weak lead from Wall Street, where the stimulus struggle trumped better-than-expected data showing fewer than a million people claimed jobless benefits last week for the first time since the pandemic struck in March.

“After stalling over several weeks, US jobless (figures) have begun to decline again, suggesting the US labour market is starting to improve, notwithstanding the economic impact from the containment measures introduced to combat the COVID-19 outbreak,” said Rodrigo Catril at National Australia Bank.

But he warned: “Ironically, an improving labour market may ease the pressure on US politicians to come up with a new stimulus plan.”

In a sign of the battle governments could have in rebooting their economies, data out of China showed consumers are still reluctant to go out spending with retail sales falling last month, confounding forecasts of a small increase.
While the drop was shallower than in June, Innes added that it speaks “volumes that it’s going to take more than stimulus and deep discounts on luxury products to get people shopping again”.

At the same time, industrial production continued to grow, suggesting the economy’s recovery is being supported by the manufacturing sector.

Investors will be keeping a close eye on talks at the weekend between China and the US that will review the trade pact signed in January, though expectations are for the deal to be kept in place, despite increasing tensions between the two sides.