HONG KONG: Asian investors moved warily Tuesday as they look ahead to a crucial week for two of the world’s top economies as Britain outlines its plans for leaving the EU and Donald Trump is sworn in as US president.
Britain’s pound edged up but remains stuck near three-decade lows against the dollar after weekend reports Prime Minister Theresa May intends to push for a clean break from the EU, including the single market and customs union.
May is due to set out her stall later Tuesday and analysts said forex traders will be poring over her remarks, with any surprises threatening to send the pound tumbling further.
Sterling was sitting around $1.2100 Tuesday, having plunged to $1.1986 Monday, its lowest since October’s “flash crash” that sent it to $1.1841 – a level not seen since the start of 1985.
Friday sees Trump’s inauguration, which many are eyeing with uncertainty.
While world markets soared in the months after his November election win he has come up short when pushed to provide details of his spending and tax plans for the world’s number one economy.
There is also unease about his campaign rhetoric in which he promised to tear up trade deals and slap tariffs on China, which has already hit back at his comments, fuelling worries of a possible trade war.
Jeffrey Halley, senior market analyst at OANDA, said in a note: “As we approach the 20th January investors, themselves are at a crossroads. Will his speech see a ‘Trump pump’ or a ‘Trump slump’?
“Do you position yourself continued for irrational exuberance or the coming of the Riders of the Apocalypse? It’s a tough question as Mr Trump’s actual policy announcements have been few, to say the least.”
On equity markets Tokyo ended 1.5 percent lower with exporters hit by fresh gains in the yen against the dollar. The greenback bought 113.20 yen Tuesday compared with 114 yen Monday.
The Japanese unit has risen more than four percent in the past week as investors shuffle back to the safe-haven unit after a November-December greenback surge.
Sydney gave up 0.9 percent and Singapore was 0.4 percent lower while Wellington and Manila also retreated sharply.
However, Hong Kong added 0.5 percent, Shanghai put on 0.2 percent and Seoul was 0.4 percent higher.
In early European trade London fell 0.3 percent, Paris lost 0.6 percent and Frankfurt was 0.7 percent lower.
“We’ve had a strong rally in equities and we remain cautious,” Niv Dagan, Melbourne-based executive director at Peak Asset Management LLC, told Bloomberg News.
“There is a bit of angst and nervousness leading up to Trump’s inauguration and on the UK’s position in Europe. We expect this volatility to continue in the near term.”
And Ronald Wan, chief executive officer at Partners Capital International in Hong Kong, added: “Trump’s policies and Brexit remain two key overhangs in Asia markets. Investors may become more risk-averse and choose assets that could hedge these risks.”
While investors are nervous, the International Monetary Fund on Monday hiked its growth outlook for the economies of Japan, the eurozone, China and the United States.
However, it did say there were many uncertainties surrounding the forecasts, citing Trump’s unknown policies and worries about possible US trade stand-offs.
Tokyo - Nikkei 225: DOWN 1.5 percent at 18,813.53 (close)
Shanghai - Composite: UP 0.2 percent at 3,108.77 (close)
Hong Kong - Hang Seng: UP 0.5 percent at 22,840.97 (close)
London - FTSE 100: DOWN 0.3 percent at 7,308.49
Pound/dollar: UP at $1.2099 from $1.2055
Euro/dollar: UP at $1.0653 from $1.0602
Dollar/yen: DOWN at 113.20 yen from 114.04 yen
Oil - West Texas Intermediate: DOWN 10 cents at $52.27 per barrel
Oil - Brent North Sea: DOWN 33 cents at $55.53
New York - Dow: Closed for a public holiday --AFP