Asian shares wobble over US emergency relief dispute

Sydney — World financial markets were hit by a wave of uncertainty on Friday after US treasury secretary Steven Mnuchin called for an end to coronavirus pandemic relief for struggling businesses, sparking a rare clash between the central bank and Treasury.

S&P 500 futures slipped 0.7% while Dow futures fell 0.8%, cancelling out a firmer lead from a strong Wall Street session overnight.

The dollar halted its weeklong slide and the 10-year Treasury yield slipped to the lowest in 10 days to 0.818%.

In Asia, Japan’s Nikkei stumbled 0.5% while South Korea’s Kospi index was flat and Australian shares were mildly positive. Chinese shares were little changed with the blue-chip CSI300 index a shade firmer.

That left MSCI’s broadest index of Asia-Pacific shares excluding Japan up 0.2%.

In a letter to US Federal Reserve chair Jerome Powell, Mnuchin said the $455bn allocated to Treasury under the CARES Act should be instead available for Congress to reallocate.

Though the programmes were not used extensively, Fed officials felt their presence reassured financial markets and investors that credit would remain available to help businesses, local agencies and even non-profit through the pandemic downturn.

Mnuchin’s decision added to market anxiety about broader economic growth as data shows the early fast recovery from a historic plunge in the US economy is fading, with more than 10- million who had jobs in January still out of work.

“The Fed has been one of the only sources of stability in Washington and removing its latitude to offer support in a shaky recovery is simply nonsensical,” said Isaac Boltansky, director of policy research at Washington-based Compass Point Research & Trading.

Investor sentiment was also affected by data that showed Covid-19 hospitalisations across the US jumped by nearly 50% in the past two weeks, threatening the recovery of the world’s largest economy as cities and states began to impose lockdowns.

Nearly 79,000 people were being treated for Covid-19 infections in US hospitals on Thursday, a Reuters tally showed, the most at any time during the pandemic. The US recorded 161,607 new daily cases on a seven-day rolling average up to Wednesday.

All three major US stock indices, however, got a healthy boost overnight after Senate Democratic minority leader Chuck Schumer said Republican majority leader Mitch McConnell had agreed to revive talks to craft a new fiscal relief package.

A senior Democratic aide told Reuters there had been a midafternoon meeting on Thursday among congressional aides that discussed coronavirus relief and efforts to pass a $1.4-trillion bill to keep government agencies operating beyond December 11 when current funding expires.

The Dow rose 0.15%, the S&P 500 gained 0.39% and the Nasdaq added 0.87%.

In currencies, the dollar index was last at 92.298, off Thursday’s low of 92.236, though still down 0.4% on the week.

The euro fetched $1.1875 while the yen stood at 103.84/$, retaining its weekly gain of 0.8%. The Australian dollar was largely flat at $0.7285, having erased most of its gains this week.

In commodities, oil prices bounced back after falling the previous day, when concerns about coronavirus lockdowns affecting fuel demand weighed on the market.

West Texas Intermediate rose 2c to $41.76 a barrel. Brent crude was up 3c at $44.23.

Gold was weaker with spot prices off 0.1% at $1,865/oz.

Reuters