TOKYO / BOSTON (Reuters) – Asian stocks on Wednesday danced on growing uncertainty over whether U.S. lawmakers would agree on an extra round of major fiscal incentives to support an economy still struggling with the novel coronavirus.
PHILO PHOTO: A man wearing a face mask is seen inside the Shanghai Stock Exchange building as the country is hit by a new outbreak of coronavirus, at the Pudong Financial District in Shanghai, China February 28, 2020. REUTERS / Aly Song
However, hope of fax development prompted some investors to reduce safe haven assets, such as gold and government bonds, and managed to buy back shares of companies hardest hit by the virus.
The mixed sentiment led to choppy trading in Asia with the ex-Japan-Asia-Pacific stock index rising 0.76%, while Japanese Nikkei gained 0.2%.
On Wall Street, the S&P 500 snapped a seven-day winning streak after reaching its all-time hit in February just before the worldwide outbreak of COVID-19.
The decline came as political gridlock between the Republican White House and congressional Democrats over coronavirus relief continued for a fourth day, with each party blaming the other for unrest.
With the exclusion of a bipartisan deal, the U.S. economy could be left with measures U.S. President Donald Trump called for on Saturday through executive orders to bypass Congress.
“We have enormous ambiguity. It seems that it will be harder for both sides to make compromises, because the elections are approaching … Trump’s proposals would be smaller than markets had expected. The question is whether they are also viable, ”said Junpei Tanaka, strategist at Pictet.
U.S. election campaigns are set to pick up steam after Democratic presidential candidate Joe Biden selected Senator Kamala Harris as his running mate.
E-mini futures for S & P500 did not change much after the news.
The yield of 10-year U.S. treasuries dipped 2 basis points to 0.636% in Asia, after hitting 0.661% in previous U.S. trade a month earlier.
At the top of hedge sales ahead of the biggest-ever-10-year note auction later in the day, bonds have lost some of their security altogether, even on growing hopes of faxing against COVID-19.
President Vladimir Putin said on Tuesday that Russia has become the first country to grant regulatory approval for a COVID-19 vaccine after less than two months of human testing.
While Moscow’s decision raises eyebrows, the news raises hopes that some of the faxes currently under development would be available sooner than expected.
Investors bought back shares for equity and other value-oriented stocks, making the former economy-centric Dow Jones outperform high-flying Nasdaq.
Globally, MSCI Value has risen 1.5%, while MSCI Growth has lost 1.3% so far this week.
“As countries around the world try to support the economy without harsh measures such as lockdowns, investors are investigating whether they can keep value stocks underweight,” said Naoya Oshikubo, senior economist at Sumitomo Mitsui Trust Asset Management.
The most dramatic move took place in gold, which on Tuesday received its biggest daily fall in seven years. On Wednesday, it fell another 1% to $ 1,891.
Still, Michael Hsueh, Commodities & FX Strategist at Deutsche Bank in New York, said there’s a good chance this week’s decline will attract fresh buyers.
“In today’s instance, the fax news is probably not enough to change the macro story, insofar as it is seen as a medical error in going through test procedures too soon,” he said, referring to the Russian vaccine.
Major currencies did not change much, with the euro almost flat at $ 1.1728 and the yen also not moving much at 107.27 per dollar.
The New Zealand dollar slipped 0.4% after the country shut down Auckland after four new cases of COVID-19 and the country’s central bank took a dull stance.
Oil prices did not change much, with Brent up 0.2% at $ 44.60 per barrel. US crude was up 0.1% at $ 41.66.
Report by Lawrence Delevingne in Boston; Edited by Sam Holmes
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