(Jan 7): Asian stocks, off to their best-ever start to a year, took a breather with Japanese equities slipping on Wednesday amid rising tensions with China.
The Nikkei 225 Index fell 0.3%, dragging the MSCI Asia-Pacific Index lower after four days of gains that had lifted it to a record. The yen was steady against the dollar.
Precious metals weakened, with silver declining 1.1% and gold falling 0.5%. A Bloomberg gauge of the dollar held its gains from the last session. Oil declined after US President Donald Trump said Venezuela would turn over as many as 50 million barrels of crude to the US.
Escalating tensions between Asia’s two largest economies are in focus in the region, even as optimism over artificial intelligence (AI) and expectations of US Federal Reserve (Fed) easing propelled global equities to a new high. Economic data due from the US later this week will test whether investors continue to shrug off geopolitical risks, including those tied to Venezuela.
“We will have a bumpier road than markets are pricing in,” Naomi Fink, the chief global strategist of Amova Asset Management, said in a Bloomberg TV interview. “Geopolitical tensions are rife worldwide now. The market is kind of shifting them aside.”
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China imposed controls on exports to Japan with potential military uses, escalating tensions between the two countries.
All dual-use items are banned from being exported to Japan for military use effective immediately, China’s Ministry of Commerce said in a statement on Tuesday.
The government’s export control list features more than 800 items, ranging from chemicals, electronics and sensors to equipment and technologies used in shipping and aerospace.
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The export controls mark China’s latest move in a pressure campaign against Japan, after Sanae Takaichi became her nation’s first sitting leader to say Tokyo could deploy its military if Beijing attempted to seize self-ruled Taiwan.
Attention in Asia was also on currencies. The Philippine peso declined to a fresh record low after the central bank signalled an interest-rate cut and as traders assessed its tolerance for a weaker currency.
The peso fell as much as 0.2% to 59.34 per dollar on Wednesday. It breached the previous record low of 59.26, which it hit in late October.
The Australian dollar declined 0.2% as rates traders trimmed bets on a February hike to 30% from 40%.
Meanwhile, the AI theme remained in focus after a flurry of updates from tech companies at the CES trade show in Las Vegas. Gainers in the tech space on Tuesday included shares of Amazon.com Inc, Micron Technology and Microsoft Corp.
Also, Nvidia Corp, countering fears about an AI spending bubble, said on Tuesday that an upbeat revenue forecast delivered in October has only gotten brighter due to strong demand. In October, Nvidia had projected about half a trillion dollars of revenue from current and future data centre chips by the end of 2026.
Investor focus this week will also turn to economic data, including business activity and jobs market reports due later in the week. A weaker-than-expected US services purchasing managers index reading on Tuesday bolstered rate cut hopes.
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“The fact that we are getting actual real-time economic data certainly seems to be a tailwind for investors,” said Art Hogan, the chief market strategist of B Riley Wealth. “That combined with excitement coming out of the CES.”
Corporate news:
- A small fleet of ships booked by Chevron Corp is sailing to Venezuela as the company emerges as the only exporter of the country’s oil following the ouster of President Nicolas Maduro by US forces.
- BYD Co outsold Tesla Inc in Europe’s two largest electric-vehicle markets last year as the Chinese automaker continued its global expansion.
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 10.21am Tokyo time on Wednesday
- Japan’s Topix fell 0.4%
- Australia’s S&P/ASX 200 rose 0.3%
- Hong Kong’s Hang Seng fell 0.4%
- The Shanghai Composite rose 1.5%
- Euro Stoxx 50 futures rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at US$1.1691
- The Japanese yen was little changed at 156.68 per dollar
- The offshore yuan was little changed at 6.9804 per dollar
Cryptocurrencies
- Bitcoin fell 0.8% to US$92,439.70 ($118,461.01)
- Ether fell 0.7% to US$3,250.90
Bonds
- The yield on 10-year Treasuries declined one basis point to 4.16%
- Australia’s 10-year yield declined three basis points to 4.76%
Commodities
- West Texas Intermediate crude fell 1.1% to US$56.51 a barrel
- Spot gold fell 0.4% to US$4,476.21 an ounce
Uploaded by Tham Yek Lee
