TOKYO / BOSTON (Reuters) – Asian stocks slipped on Wednesday over growing uncertainty over whether U.S. lawmakers would strike a deal over an extra round of major fiscal incentives to support an economy still struggling with the coronavirus pandemic.
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%.
Chinese mainland shares fell 1.7%, due to concerns about the economic recovery after data showed a slowdown in the country’s money ban and growth in bank lending.
European equities are expected to open lower, with Euro Stoxx 50 futures falling 0.6%.
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 declines came as political gridlock between the White House and Congress Democrats over coronavirus relief continued for a fourth day.
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.
The yield of 10-year U.S. treasuries dipped 1 basis point to 0.647% in Asia after hitting 0.661% a month earlier in trading.
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.
Russian President Vladimir Putin said on Tuesday that his country was the first to give regulatory approval to 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 hair and other value-oriented stocks, making the former economy-centric Dow Jones better than the tech-oriented Nasdaq.
Globally, the MSCI Value Index has risen 1.6% so far this week, while the MSCI Growth Index has lost 1.2%.
The most dramatic movement took place in precious metals.
Gold fell 1.6% to $ 1,881.4 per ounce, a day after hitting its biggest daily fall in seven years. Silver lost 3.2% to $ 23.99 per ounce, after hitting its 15% high on Tuesday.
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 grew to greater-than-expected drop in U.S. inventories, with Brent up 0.6% at $ 44.75 a barrel. US crude was up 0.5% at $ 4.80.
Report by Hideyuki Sano in Tokyo, Lawrence Delevingne in Boston; additional report by Tomo Uetake in Sydney, Edited by Sam Holmes
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