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US political turmoil hits Asia markets

Thursday 02.40 BST

Overview

Equities fell and havens rallied in Asia on Thursday, as political turmoil in the US scuppered risk appetite in Asia.

Hot topic

Stock markets across Asia took their cues from Wall Street, where the S&P 500 suffered its biggest one-day drop in eight months on Wednesday as mounting political turmoil in Washington fuelled a wave of risk aversion.

The general concern is that reports that president Donald Trump tried to interfere in an FBI investigation will push back or upend his market-positive initiatives such as tax cuts.

In Tokyo the Topix index was down 1.6 per cent on Thursday, little helped by a Q1 GDP reading that outperformed expectations. The financials segment shed 2.9 per cent and telecoms dropped 2.4 per cent, with energy stocks down 2.3 per cent.

Sydney’s S&P/ASX 200 was down 1.3 per cent, led lower by a 3.1 per cent fall in information technology stocks and a 2.2 per cent drop by financial stocks. Shares in Fairfax Media climbed 6.9 per cent after US private equity group Hellman & Friedman made a $2.2bn bid for the company, rivalling a previous offer from a consortium led by TPG Group.

The Hang Seng was down 0.7 per cent in Hong Kong led by consumer discretionary stocks, down 1.7 per cent, and financials, off 1.4 per cent. Tencent was up 1.4 per cent after reporting strong results on Wednesday after the market close. Seoul’s Kospi index was down 0.7 per cent.

Forex

The US dollar was slightly weaker in Asia trade, with the dollar index, which tracks the US currency against its peers, down 0.2 per cent. This followed a fall of 0.5 per cent on Wednesday.

Asia Pacific currencies were largely down against the greenback, however, with the South Korean won the worst off, with a 0.7 per cent drop that left it at Won1,125.29 per dollar. The Australian dollar was up 0.2 per cent at $0.745, rebounding from a drop after employment data came in much stronger than expected.

Japan’s yen was 0.1 per cent weaker at 110.97, still below the ¥111 mark as global market tumult bolstered the currency’s allure as a haven asset.

Fixed income

Sovereign bonds across the region were rallying amid a downturn in stocks. Yield, which moves inversely to price, on the 10-year Australian government bond was down 7bp at 2.461 per cent.

The 10-year Japanese government bond saw yield tick down 1bp to 0.025 per cent, while the 10-year South Korean note’s yield fell 2bp to 2.216 per cent.

Yield on 10-year US Treasuries was up 1bp at 2.2295 per cent, however, after having finished the Wednesday session 10bp lower.

Commodities

Oil was pulling back from Wednesday gains spurred by the latest data on US inventories.

Brent crude, the international benchmark, was down 0.4 per cent in Asia at $52 a barrel after closing the previous session 1.1 per cent higher. West Texas Intermediate was off 0.5 per cent at $48.85.

Gold was up 0.1 per cent at $1,262.07 per ounce, building on Wednesday’s climb of 2 per cent.

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