Asian stocks fell on Tuesday as the lift from an agreement that saved the North American free trade deal faded, with cautious views on the global economy curbing risk sentiment. In commodities, U.S. crude futures were up 0.4 percent at 75.60 dollars a barrel.
Crude contracts surged nearly three per cent to 75.77 dollars a barrel on Monday, their highest since November 2014, as the deal to salvage NAFTA stoked economic growth expectations, with impending U.S. sanctions on Iran seen raising prices. Brent crude edged up 0.1 per cent to 85.07 dollars a barrel.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.3 per cent after a steady start. Australian stocks lost 0.7 per cent and South Korea’s KOSPI fell 0.9 per cent. Bucking the overall trend, Japan’s Nikkei added 0.1 per cent, after rising as much as 0.8 per cent to a new 27-year intra-day high of 24,448.07.
Spreadbetters expected a weaker tone in European equities, forecasting a lower open for Britain’s FTSE, Germany’s DAX and France’s CAC. China’s financial markets are closed for the week of Oct. 1-5 for national holidays. Hong Kong’s Hang Seng, which did not trade on Monday due to a holiday, dropped 1.9 per cent in reaction to signs of weakness in the Chinese manufacturing sector shown in purchasing managers’ index (PMI) numbers released on Sunday.
“While news that the U.S. and Canada had struck a new NAFTA trade deal gave the S&P 500 a lift overnight, dark clouds are gathering,” strategists at OCBC Bank wrote in a note. “With some signs of weakness in the European and Asian manufacturing PMIs Asian, markets may trade with a slightly more cautious tone.” IHS Markit purchasing managers’ indices released on Monday showed manufacturing growth in the euro zone slowed to a two-year low at the end of the third quarter.
The United States and Canada forged a last-minute deal on Sunday to salvage NAFTA as a trilateral pact with Mexico, rescuing a 1.2 trillion dollars open-trade zone that had been about to collapse after nearly a quarter century in operation.
The Dow rose 0.73 per cent and the S&P 500 gained 0.36 per cent on Monday after the deal to preserve NAFTA helped ease trade worries. “There were concerns that the resulting confusion would exceed that of the U.S.-China trade row if NAFTA was scrapped. ”While it appears like Canada and Mexico caved in to the United States, the outcome is positive for global trade and the economy,” said Yoshihisa Maruyama, chief market economist at SMBC Nikko Securities in Tokyo.
The Canadian dollar traded at C$1.2815 per dollar after rallying to a four-month high of C$1.2782 overnight following the trilateral trade pact. The euro was little changed at 1.1543 dollars after slipping 0.25 percent on Monday on renewed concerns about heavily-indebted Italy’s budget. The single currency has been hurt by concerns that a significant increase in the Italian budget will deepen Italy’s debt and deficit problems.
The dollar was at 113.845 yen after scaling an 11-month high of 114.06 yen on Monday, as improving investor risk sentiment weighed on the Japanese currency. The yen is usually seen as a safe haven at times of turmoil but recedes when risk appetite returns. The dollar index against a basket of six major currencies rose 0.2 per cent to 95.462, its highest since Sept. 10.
The greenback drew support from an uptick in U.S. Treasury yields as Wall Street gains curbed demand for safe-haven debt worth of three-and-seven-year treasury bonds on Monday , the central bank said. There were cancelled sales for four successive weeks. The three-year bonds carried an average yield of 18.432 per cent while the seven-year bonds carried an average yield of 18.431 per cent, bank data showed. The bank sold 750 million pounds of three-year bonds, the same amount it was seeking.
It sold 153 million pounds of seven-year bonds, well under the 500 million pounds worth it had sought. Demand for local currency bonds has declined and yields have risen since currency crises in Argentina and Turkey scared foreign investors away from emerging markets.
Egypt’s central bank has been reluctant to lock itself into long term maturities at high yields. ($1 = 17.8600 Egyptian pounds)
Source: Pm News