Markets Aug 06

Asian markets retreat as tech tensions simmer

Gold continues its record breaking streak; Australia outperforms on miners; US warning on TikTok, WeChat stokes tensions

Asian markets retreat as tech tensions simmer
Chinese tech applications, such as WeChat, seen here, have been in the spotlight lately amid US-China tensions. Pic: AFP.

(ATF) Asian markets have retreated as the deadlock between US senators continues over a further pandemic relief bill and growing US-China tensions. US Secretary of State Mike Pompeo also warned that his government wanted untrusted Chinese apps removed from US app stores.

“With parent companies based in China, apps like TikTok, WeChat, and others are significant threats to the personal data of American citizens, not to mention tools for CCP content censorship,” Mike Pompeo said at a press conference on Wednesday.

While investors continue to offload risk, gold extended its winning streak hitting another record high with key economic data looming.

Gold stayed above $2,040 per ounce after hitting a new peak with stocks mostly lower across the region.

Base metals rally

Japan’s Nikkei index has eased 0.3%, Hong Kong’s Hang Seng benchmark has retreated 1.5% and mainland China’s CSI 300 index has tumbled 0.88%. But Australia’s S&P ASX 200 benchmark has edged up 0.4% as miners were lifted by a base metals rally stoked by gold’s surge.

Overnight, the Dow Jones Industrial Average rose 1.4%, the S&P 500 gained 0.6% and the Nasdaq Composite added 0.5%, posting a new record peak and closing high as investors speculated there could be a breakthrough in the pandemic relief measures proposed.

“US lawmakers remain at an impasse ahead of the deadline with investors also looking to Friday’s non-farm payroll data for direction. New Covid-19 daily infections have levelled off from the peak in the US, while outbreaks in Japan and Australia appear to be intensifying,” ING Bank economists Prakash Sakpal and Nicholas Mapa said in a note. “Investors will cautiously monitor developments on the vaccine front and look to economic data for fresh cues on Thursday.”

Still, with the global coronavirus infection count now topping 18.7 million and the death count jumping above 700,000, the hit to economies is keeping investors worried.

Test for policymakers

“The biggest challenge facing Asean+3 policymakers in the second half of 2020 will be balancing the trade-off between easing restrictions to revive their economies and risking another wave of infections,” Dr Li Lian Ong, group head and lead specialist for financial surveillance and acting group head for regional surveillance at AMRO, said. “Managing the exit from the raft of pandemic policies will be key to regional financial stability.”

Asian credit markets are marginally firm with the Asia IG index moving in a basis point to 67/68. The hunt for yield has encouraged new bond offerings. Qingdao China Prosperity and BMW Finance have unveiled bond offerings.