Asian markets turn lower as trade worries seep back

Profit-takers moved in with few catalysts to drive business but investors are watching for developments on issues from China-US trade talks to Brexit. (Photo: AFP/Daniel Roland)

While there were few catalysts to drive business and Wall Street was closed for a holiday investors are keeping tabs on developments in various issues including the US government shutdown, Brexit and China's stuttering economy.

The optimism surrounding the trade talks was jolted by a Bloomberg News report that said the two sides were struggling to reach agreement on the crucial matter of intellectual property, which is a key source of anger in Washington.

Also, China's Xinhua news agency reported that President Xi Jinping had told top provincial leaders the Communist party "is facing long-term and complex tests in terms of maintaining long-term rule, reform and opening-up". The comments suggest he is growing worried about the effects of slowing economic growth.

While headlines regarding talks earlier this month were upbeat, and eyes turn to another meeting including China's top negotiator Liu He at the end of January, the Bloomberg story, referencing unnamed sources, provided a reality check.

"Recent signs suggest that China is struggling to sustain economic momentum, and risks of a hard landing are rising. If China falls back to earth, we will all feel the tremor," economists at Northern Trust said in a note.

Hong Kong was down 0.7 per cent, while Shanghai finished 1.2 per cent lower. Tokyo skidded 0.5 per cent, along with Sydney while Singapore was 0.9 per cent off and Seoul dropped 0.3 per cent.

Wellington, Mumbai and Manila were also well down.

In early trade London and Paris each fell 0.5 per cent while Frankfurt was off 0.6 per cent.

POUND DIPS

Concerns about the outlook led the International Monetary Fund to lower its growth forecasts for the global economy, citing the trade row, Brexit and other problems.

On currency markets the pound edged down against the dollar, having bounced on Monday after British Prime Minister Theresa May said she would try to hammer out changes to her Brexit deal that was roundly rejected by MPs last week.

While there is no plan in place to leave the EU on Mar 29, markets are confident lawmakers will avoid a damaging no-deal Brexit, with options being touted including a delay to the leaving date and another referendum.

The opposition Labour Party leader Jeremy Corbyn has backed plans for a vote in parliament on another referendum.

The pound "has been helped by ongoing optimism that a hard Brexit will be avoided on 29th March", said Ray Attrill, strategist at National Australia Bank.

He pointed out that MPs from both sides of the aisle had proposed a bill pushing for a delay if an agreement cannot be agreed in parliament by Feb 26.

"There's a good chance this gets up. If so, it further flattens the tail risk of a hard Brexit on Mar 29, though note all 27 EU nations will need to agree to an extension, so it wouldn't eliminate the risk completely," Attrill added.

Oil prices extended Monday's losses that came in response to data showing China's economy grew last year at its slowest pace for almost three decades.

- Key figures around 0820 GMT -

Tokyo - Nikkei 225: DOWN 0.5 per cent at 20,622.91 (close)

Hong Kong - Hang Seng: DOWN 0.7 per cent at 27,005.45 (close)

Shanghai - Composite: DOWN 1.2 per cent at 2,579.70 (close)

London - FTSE 100: DOWN 0.5 per cent at 6,933.30

Pound/dollar: DOWN at US$1.2861 from US$1.2892 at 2100 GMT Friday

Euro/dollar: DOWN at US$1.1349 from US$1.1370

Dollar/yen: DOWN at ¥109.41 from ¥109.63

Oil - West Texas Intermediate: DOWN 33 cents at US$53.47 per barrel

Oil - Brent Crude: DOWN 49 cents at US$62.25 per barrel

New York - Closed for public holiday