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Asian markets resume rally as pound holds ground ahead of vote

International Business
Tue, 15 Jan 2019

Hong Kong: Asian markets on Tuesday rebounded from the previous day's sharp losses but investors remain wary of any further sign of weakness in the global economy while the pound extended gains ahead of a crunch Brexit vote later in the day.

China's disappointing trade data on Monday sent shivers through trading floors as it showed the long-running US tariffs row is beginning to bite.

But dealers got back on the horse, resuming last week's rally that was fuelled by optimism that Beijing and Washington will eventually resolve their differences and the Federal Reserve will pause in raising interest rates.

Tuesday's gains were helped by a bump in financials after Wall Street giant Citibank said it provided a positive outlook for its trading environment ahead of the corporate earnings season, while energy firms were supported by rising oil prices.

Hong Kong climbed 1.8 per cent in the afternoon, Shanghai ended up 1.4 per cent, with investors also cheered by news that officials are planning a range of tax cuts to support the stuttering economy.

Tokyo gained one per cent while Seoul, Singapore, Taipei and Mumbai were each more than one per cent higher. Sydney, Wellington and Jakarta were also well up.

Still, uncertainty is keeping traders' feet on the ground, with the US shutdown, which is now in its fourth week beginning to fuel concerns and showing no sign of ending soon.

"There are two macro events that continue to weigh on market perspective," Frances Donald, an analyst at Manulife Asset Management, said.

"The first is where is global growth heading next, and weak Chinese trade data would suggest that global growth is certainly not bottomed as of yet. And the second issue is the persistence of the US government shutdown and how that muddies our perspective about what happens next."

The pound continues to rise against the dollar and is now sitting above the $1.29 mark for the first time since late November ahead of the vote by MPs on Prime Minister Theresa May's controversial Brexit deal.

While the plan is expected to lose, experts say the margin of loss will be key. A massive defeat for the government would mean her deal is dead in the water and the pound could dive to a two-year low of around $1.22.

However, a smaller loss could provide some wiggle room for May to hammer out a more palatable agreement with her EU counterparts.

For their part, more than 100 members of the European parliament promised to back a delay to the Article 50 deadline of March 29 for Britain to formally leave the EU and try to avert an economically damaging no-deal split.

May on Monday delivered a last-ditch plea to lawmakers to back her deal, saying they "have a duty to implement the result of the referendum".

But with her defeat widely expected, opposition Labour leader Jeremy Corbyn has said he will call for a vote of no confidence in the government, which could lead to another general election, fuelling more uncertainty.

Tokyo - Nikkei 225: UP 1.0 per cent at 20,555.29 (close)

Hong Kong - Hang Seng: UP 1.8 per cent at 26,783.35

Shanghai - Composite: UP 1.4 per cent at 2,570.34 (close)

Pound/dollar: UP at $1.2904 from $1.2870 at 2100 GMT

Euro/dollar: UP $1.1473 at $1.1469

Dollar/yen: UP at 108.66 yen from 108.17

Oil - West Texas Intermediate: UP 71 cents at $51.22 per barrel

Oil - Brent Crude: UP 82 at $59.81 per barrel

New York - Dow: DOWN 0.4 per cent at 23,909.85 (close)

London - FTSE 100: DOWN 0.9 per cent at 6,855.02 (close)

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