Asian traders stayed cautious yesterday despite fresh records on Wall Street as Donald Trump’s tax-cut plans moved a step closer, while the pound extended gains on reports of a breakthrough in Brexit talks.
While markets were mixed, investors brushed off early worries about North Korea’s latest missile test.
Bitcoin continued its surge to break the $10,000 mark for the first time.
New York traders cheered a forecast-beating US consumer confidence survey and news that a key senate committee agreed to a fiscal overhaul plan late Tuesday, fuelling a rally to new records on the city’s three main indexes. The move allows Trump’s much-vaunted proposals to be debated on the floor of the upper chamber, a relief to many who had feared opposition from some Republicans would kill it.
Shane Chanel, equities and derivatives adviser at ASR Wealth Advisers, said the agreement “is a significant milestone and the chances of a negotiated version being implemented this year is likely”.
“There is a lot of optimism being priced in currently,” he said, but warned that “delays or a rejection of the bill will result in a sharp correction in December”. The dollar rallied in US trade on the news and managed to hold its gains in Asia, buying ¥111.48 after having dipped below ¥111 at one point Tuesday.
But seemingly dovish comments from Trump’s choice to head the Federal Reserve kept it from surging. The weaker yen helped the Nikkei end 0.5% higher, while Sydney also added 0.5%. Wellington and Taipei also edged up. Ongoing worries about China’s crackdown on risky and speculative trading dragged Hong Kong down 0.2% at the close but Shanghai recovered from early losses to end 0.1% higher.
Seoul and Singapore each dropped 0.1%. Analysts said there was some concern that in trying to calm surging mainland markets and stop cash leaving the country, China would try to stem the amount dealers can invest in Hong Kong.
“If money keeps going south to Hong Kong, then for a closed-end system such as (China’s) market, it will present a liquidity drainage,” Hao Hong, chief strategist at Bocom International Holdings in Hong Kong, told Bloomberg News.
“Now that they have a policy stance to slow down the flows, and Hong Kong is coming near the 30,000 resistance, you may see money slowing down.” The pound edged up after Tuesday’s rally following reports of a British-EU deal on a Brexit bill, meaning they can now move to talks on a future trade deal.
“This headline is fantastically positive news for the beleaguered pound,” said Stephen Innes, head of Asia-Pacific trading at OANDA. “The financial settlement should pave the way to possible breakthrough in negotiations in December, overcoming investors’ biggest fears: a hard Brexit.”
Bitcoin, which has ploughed to continuous records in recent weeks, finally broke $10,000 yesterday and pushed towards $11,000. The virtual currency hit a high of $10,903 in Asia with some commentators suggesting it is being bought as an alternative, with mainstream global markets valued too high.
But there is a worry that the rise — it has surged more than tenfold since its 2017 low in mid-January — will result in a massive correction.
“This is a bubble and there is a lot of froth. This is going to be the biggest bubble of our lifetimes,” warned hedge fund manager Mike Novogratz at a cryptocurrency conference earlier this week.
In Tokyo, the Nikkei 225 closed up 0.5% at 22,597.20 points; Hong Kong — Hang Seng ended down 0.2% at 29,623.83 points and Shanghai — Composite rose 0.1% at 3,337.86 points yesterday.