Hong Kong: Asian investors took a step back on Tuesday after the previous day’s rally, with some scepticism over the China-US trade deal seeping in, while oil prices pushed higher after Washington flagged harsh sanctions on key producers Iran and Venezuela.
World markets fizzed Monday after US Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He said they had agreed to pull back from the brink of a potentially damaging trade war.
However, while fears about the tariffs spat had roiled equities for months, investors were unable to kick on as they take a closer look at Sunday’s pact, which offered few details.
Analysts also pointed out the lack of agreement over intellectual property — a major stocking point for Donald Trump — as well as several other sectors.
Also tempering the optimism are worries about higher US interest rates and geopolitical issues.
“Markets are going through a bumpy ride,” Bank of Singapore Investment Strategist James Cheo told Bloomberg Television.
“This trade truce is still in the early days. It’s really a ceasefire, it’s not a peace treaty as yet. The implementation details are still unclear. There is still some caution among Asian investors.”
– ‘Strongest sanctions’ –
In early trade Shanghai was down 0.2 percent, while Tokyo finished the morning slightly down, Sydney slipped 0.9 percent and Wellington gave up 0.1 percent.
However, Singapore and Taipei each edged up 0.2 percent.
Hong Kong and Seoul were closed for public holidays.
Oil prices extended Monday’s gains of around one percent as the US unveiled its sanctions plans.
Secretary of State Mike Pompeo warned Tehran would be hit with the “strongest sanctions in history” while also warning European firms they were at risk if they continued to work with Iran, toughening up Washington’s policy line leaving the nuclear deal this month.
That came as Venezuela was targeted with fresh measures after the re-election of President Nicolas Maduro, which the US branded a “sham”.
Trump signed an executive order barring Americans from buying debt from Venezuela, cutting off an important source of revenue for the cash-starved regime. The measures did not target the country’s crucial oil exports, though analysts said they would likely be in the firing line at some point.
The moves put upward pressure on crude, which had been drifting after last week’s healthy gains, which have sent prices to highs not seen since late 2014.
“Fresh sanctions on Venezuela after the weekend election — including on bond-buying — and a belligerent speech from US Secretary of State Pompeo on Iran turned traders from some mild selling back to the buy side,” said Greg McKenna, chief market strategist at AxiTrader.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: FLAT at 23,000.72 (break)
Shanghai – Composite: DOWN 0.2 percent at 3,207.06
Hong Kong – Hang Seng: Closed for a public holiday
Euro/dollar: UP at $1.1790 from $1.1789
Pound/dollar: DOWN at $1.3427 from $1.3429
Dollar/yen: DOWN at 110.98 yen from 111.03 yen
Oil – West Texas Intermediate: UP 25 cents at $72.49
Oil – Brent North Sea: UP 15 cents at $79.37 per barrel
New York – Dow: UP 1.2 percent at 25,013.36 (close)
London – FTSE 100: UP 1.0 percent at 7,859.17 (close)