Asian markets swing as dealers battle uncertainty

Investors are growing nervous about the global outlook as China's economy stutters, while other issues continue to hurt confidence including the US government shutdown at Brexit. (Photo: AFP/Johannes Eisele)

The mood remains cautious, with the rally that has characterised the start of the year stuttering owing to a slowing Chinese economy, a softer global outlook and other issues including Brexit and the US government shutdown, which shows no sign of ending soon.

US investors turned sellers on Tuesday after the Financial Times and CNBC said Washington had rejected Beijing's offer of preparatory discussions ahead of the next round of high-level negotiations.

And while the White House denied the reports, observers said they highlighted the fragility of the talks. They also came a day after Bloomberg News said the two sides were struggling to reach agreement on the crucial matter of intellectual property, a key source of US anger.

Hopes that China and the US were on the right track have helped rally global markets in January, having suffered a torrid 2018.

But data showing China's economy grew at its weakest pace in three decades added to fears it is heading for a hard landing, while Xi Jinping also showed signs of worrying about the effects of a slowdown in a speech to top provincial leaders this week.

"Investors obviously are still a little bit edgy and therefore we would expect periods of volatility to continue," Mark Hackett, chief of investment research at Nationwide Funds Group, said.

"As the headlines continue to get more nerve-wracking with regards to a global slowdown and trade wars and government shutdowns, it's easy to spook investors, but we think those are temporary versus permanent."

Adding to concerns was confirmation that the US plans to seek the extradition from Canada of a top executive with Chinese telecom giant Huawei before the end of January.

'FALLING DEMAND'

Hong Kong was flat having swung back and forth through the day, while Shanghai closed 0.1 per cent higher and Tokyo ended slightly down.

Sydney was down 0.3 per cent while Singapore shed 0.7 per cent and Seoul added 0.5 per cent. Wellington, Taipei and Manila were all lower while Mumbai, Bangkok and Jakarta inched up.

In early trade London and Paris each fell 0.4 per cent, while Frankfurt was off 0.6 per cent.

Oil prices were slightly higher after taking a hit Tuesday on lingering worries about the effect of a slowdown in the global economy, and particularly China, on demand.

The commodity has jumped around a fifth from lows touched in December - having dived about 40 per cent from early October - but investors continue to fret over the demand outlook as producers keep the taps open.

"The story behind the broad-based selling (in commodities) is an easy one: falling demand," said OANDA market analyst Edward Moya, pointing to China's slowing growth, the IMF's decision to lower its global forecasts and downbeat outlooks from big firms this earnings season.

"US shale production continues to surge and pushing refiners to the highest pace in 15 years. Record stocks of fuel keeps the gasoline glut in focus," he added.

On currency markets the yen eased against the dollar after the Bank of Japan again revised down its inflation forecasts as it struggles to achieve its long-sought two percent rate. It said the decision to revise down the forecast was "due primarily to the decline in crude oil prices".

- Key figures around 0820 GMT -

Tokyo - Nikkei 225: DOWN 0.1 per cent at 20,593.72 (close)

Hong Kong - Hang Seng: FLAT at 27,008.20 (close)

Shanghai - Composite: UP 0.1 per cent at 2,581.00 (close)

London - FTSE 100: DOWN 0.4 per cent at 6,871.56

Euro/dollar: UP at US$1.1368 from US$1.1361 at 2140 GMT

Pound/dollar: UP at US$1.2959 from US$1.2957

Dollar/yen: UP at ¥109.65 from ¥109.37

Oil - West Texas Intermediate: UP 24 cents at US$53.25

Oil - Brent Crude: UP 31 cents at US$61.81 per barrel

New York - DOW: DOWN 1.2 per cent at 24,404.48 (close)