Asian shares gain; shrug off Trump controversy

TOKYO: Asian shares gained on Wednesday after Wall Street managed to weather a fresh twist in the controversy over US President Donald Trump’s alleged connection with Russia, while investors looked ahead to Federal Reserve Chair Janet Yellen’s comments.
MSCI’s broadest index of Asia-Pacific shares outside Japan ticked up 0.4 per cent.
Japan’s yen-sensitive Nikkei slid 0.3 per cent on the yen’s gains but MSCI’s dollar-denominated Japan index gained 0.4 per cent.
US stocks took a brief tumble after emails disclosed Trump’s eldest son welcomed help from a Russian lawyer for his father’s 2016 election campaign against Hillary Clinton.
But by the closing bell, Wall Street shares had clawed back their losses.
“The emails look pretty bad but then again they don’t look like decisive evidence (for illegal behaviour) either.
I doubt this alone would lead to a risk-off market,” said Hiroko Iwaki, senior fixed income strategist at Mizuho Securities.
US shares were helped in part as the Senate announced a two-week delay to its August recess to allow more time to tackle a measure that would repeal key parts of Obamacare, as well as pursue other legislative priorities.
Still, it remained unclear whether US Senate Republicans have the votes to pass the measure or even what form it would finally take.
On the other hand, the dollar failed to recover after the damage suffered from the new twist in the Trump campaign’s alleged links with Russia.
The euro vaulted to a 14-month high of $1.1484 in Asian trade.
The dollar also lost steam against the yen, which had been under renewed pressure following Friday’s bond-buying by the Bank of Japan which highlighted divergent monetary polices between the two countries.
The US currency dropped 0.3 per cent to 113.60 yen, slipping from a four-month high of 114.495 yen touched on Tuesday.
The dollar index against a basket of six major currencies was hovering at 95.64, within sight of its nine-month low of 95.47 plumbed at the end of June.
US Treasuries yields stayed below their recent peaks, with the 10-year yield at 2.355 per cent, compared with 2.398 per cent marked on Friday, its loftiest level in almost two months.
Ahead of Fed Chair Yellen’s testimony to Congress on the state of the US economy from 1400 GMT, two of her colleagues cited low wage growth and muted inflation as reasons for caution on further interest rate increases.
Fed Governor Lael Brainard embraced the plan to reduce the balance sheet “soon,” but suggested her support for any future rate increases will depend in part on how inflation shapes up.
Minneapolis Federal Reserve Bank President Neel Kashkari said he finds it hard to believe that the US economy is in danger of overheating when wage growth is so low.
Traders trimmed expectations of a rate hike by the end of the year, with dollar interest rate futures pricing in about a 55 per cent chance compared to about 60 per cent earlier, while most investors expect the Fed to decide to start shrinking its balance sheet in September.
“Yellen has indicated after the June policy meeting, in the clearest way as possible by her standards, that she plans to start balance sheet reduction and there will be one more rate hike this year.
Since then, there’s been no big changes in the economy,” said Tomoaki Shishido, Senior Market Economist at Nomura Securities.
“I would think the US CPI data on Friday could be more important.
If the Fed’s assessment that the softness in CPI between February and May is transitory, the Fed will go ahead with its plan.— Reuters