Asian shares slip away from record high

Singapore/Washington — Asian equities eased from a record high on Thursday as stalled US stimulus talks and a sell-off in tech stocks weighed, while sterling traders sat on a knife’s edge as last-ditch Brexit negotiations yielded only an agreement to keep talking.

MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.3%, while Japan’s Nikkei fell by the same margin. Both are up more than 60% from March lows.

US treasuries rose and the dollar steadied after a volatile overnight session in currency markets, with traders now looking ahead to a European Central Bank (ECB) monetary policy meeting. Sterling teetered at $1.3363 as it awaits a Brexit resolution.

“We’ve risen so far so fast that it’s making investors cautious,” said Michael McCarthy, chief strategist at stockbroker CMC Markets in Sydney.

“The fall in tech stocks was a bit of a concern, given that they’ve risen in all market weather over the last six weeks, so to see them come off might signal that we’re looking at a short term corrective move.”

A near 2% drop in the Nasdaq on Wednesday was driven by a 1.9% fall in Facebook shares after US regulators filed lawsuits alleging the company used its dominance to buy or crush rivals, harming competition.

Meanwhile, breakthroughs were elusive in long-running US pandemic relief negotiations and talks between British and EU leaders over trade arrangements post Brexit.

US legislators approved a stopgap government funding bill on Wednesday, but were unable to sort out disagreements over aid to state and local governments that are holding up a broader spending package.

Meanwhile, British Prime Minister Boris Johnson and the EU’s CEO gave themselves until the end of the weekend to seal a new trade pact

The estranged allies remain far apart over issues from fisheries to dispute resolution. About $1-trillion in annual trade is at risk of facing tariffs and quotas if a deal cannot be reached before transition arrangements end on December 31.

British and European futures slipped marginally in Asia, with FTSE futures and EuroStoxx 50 futures down 0.1%. S&P 500 futures rose 0.1%.

ECB ahead

Later on Thursday the ECB is expected to unveil more bond buying and cheap loans to prop up the recession-hit currency bloc long enough for a coronavirus vaccine to be deployed.

Traders are also looking for what, if anything, the bank will do or say about a common currency that has surged nearly 14% from its March lows — hindering Europe’s exporters.

“We do not think there will be an explicit talking down of the euro, but expect ECB chief [Christine] Lagarde to mention the central bank is keenly monitoring the currency strength,” analysts at Singapore’s OCBC Bank said in a note.

Elsewhere, faith in the recovery appears to be holding up, with oil prices steady despite a build-up in US inventories. Brent crude futures last sat 0.5% firmer at $49.09 a barrel and US crude was up 0.6% at $45.79 a barrel.

Gold nursed losses at $1,840/oz.

Treasuries traded firmly owing to uncertainty around US stimulus wrangling, and the yield on benchmark US 10-year treasuries fell 1.7 basis points to 0.9245%.

“The uncertainty around the timing is less important than the uncertainty around the overall size of the package, which depends primarily on the outcome of the Senate run-offs in Georgia on January 5,” Goldman Sachs analysts said in a note.

“For now, our assumption is a $700bn Covid relief package,” they said, adding it would be upgraded to between $1-trillion and $1.5-trillion if Democrats win the two seats.

Reuters