Asian shares fall ahead of US elec­tions

The Myanmar Times - - Business | International -

ASIAN shares wob­bled on Tues­day, sup­ported by Wall Street gains al­though sen­ti­ment was tem­pered ahead of the U.S. midterm elec­tions, the first ma­jor elec­toral test of Pres­i­dent Don­ald Trump’s big tax cuts and hos­tile trade poli­cies.

MSCI’s broad­est in­dex of Asia-Pa­cific shares out­side Ja­pan edged down 0.1 per­cent, weighed by a fall in and Chi­nese shares and tech­nol­ogy shares while Ja­pan’s Nikkei man­aged to gain 1.0 per­cent.

Shares in Asia-Pa­cific Ap­ple sup­pli­ers such as Tai­wan’s Hon Hai Pre­ci­sion In­dus­try, eased af­ter Ap­ple Inc lost 2.8 per­cent af­ter the Nikkei news­pa­per re­ported that the com­pany had told its smart­phone as­sem­blers to halt plans for ad­di­tional pro­duc­tion lines ded­i­cated to the iPhone XR.

On Wall Street, the S&P 500 gained 0.56 per­cent, with fi­nan­cials such as Berk­shire Hath­away sup­ported by strong earn­ings.

In oil mar­kets, crude prices wob­bled near multi-month lows af­ter the United States granted eight coun­tries tem­po­rary waivers al­low­ing them to con­tinue buy­ing oil from Iran as Wash­ing­ton for­mally im­posed puni­tive sanc­tions on the Is­lamic re­pub­lic.

Ahead of Tues­day’s U.S. elec­tions, in­vestors gen­er­ally ex­pect op­po­si­tion Democrats to take over the House of Rep­re­sen­ta­tives while Trump’s Re­pub­li­can Party is tipped to re­tain the Se­nate.

While po­lit­i­cal grid­lock be­tween the White House and Con­gress could hin­der Trump’s pro-busi­ness agenda and raise po­lit­i­cal in­sta­bil­ity, in­clud­ing hear­ings cen­tring on the ad­min­is­tra­tion, some an­a­lysts say such an out­come may have al­ready been priced in by in­vestors.

If the Re­pub­li­cans re­tain their House ma­jor­ity, global stocks are likely to rally on hopes of more tax cuts.

Trump said last month his ad­min­is­tra­tion planned to pro­duce a res­o­lu­tion call­ing for a 10 per­cent tax cut for mid­dle-in­come house­holds.

“Ev­ery­one still re­mem­bers strong eq­uity ral­lies af­ter Trump was elected two years ago. So ini­tially stock mar­kets will gain,” said Nori­hiro Fu­jito, chief in­vest­ment strate­gist at Mit­subishi UFJ Mor­gan Stan­ley Se­cu­ri­ties.

“But fur­ther tax cuts would boost al­ready large fis­cal deficits and push the 10-year U.S. Trea­suries yield above its Oc­to­ber high al­most in­stantly. Given rises in U.S. bond yields trig­gered a cor­rec­tion in eq­ui­ties last month, any rally in stocks is un­likely to last long,” he added.

The 10-year U.S. Trea­suries yield stood at 3.203 per­cent , main­tain­ing most of its gains fol­low­ing Fri­day’s strong U.S. jobs and wage data and stay­ing not far from its 7 1/2-year peak of 3.261 per­cent hit on Oct. 9.

“Global eq­ui­ties have re­cov­ered af­ter their fall in Fe­bru­ary, which was trig­gered by rise in U.S. yields. But this time a re­cov­ery will likely be capped be­cause now mar­kets do not have the sup­port they had back in Fe­bru­ary from tame in­fla­tion and the eco­nomic boost from Trump’s tax cuts,” said Shuji Shi­rota, head of macro-eco­nomic strat­egy at HSBC in Tokyo.

Many in­vestors also ex­pect Trump to con­tinue to take a hard line on trade, re­gard­less of the out­come of the elec­tions.

“The im­pact of trade war will start to ap­pear in U.S. eco­nomic data in com­ing months,” Shi­rota added.

But some other an­a­lysts noted that U.S. eq­ui­ties tended to rally af­ter midterm elec­tions, pos­si­bly be­cause mar­kets tend to price in po­lit­i­cal risks ahead of the elec­tions. – Agen­cies

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