SINGAPORE: Asian stocks fell on Tuesday as the political tinderbox in the Middle East and the Korean Peninsula added to uncertainty over the looming French vote, pushing nervous investors into safer assets such as the yen and Treasuries.
Even oil, which advanced earlier on supply concerns in the wake of US missile strikes on a Syrian air base last week and a shutdown at a Libyan oilfield, reversed to trade lower, breaking its multi-session winning streak.
European stocks were also on track for a subdued start, with financial spreadbetters tipping Britain’s FTSE 100 and France’s CAC down 0.1 per cent, and Germany’s DAX off 0.2 per cent.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.3 per cent.
“Most Asian markets could be seen with moderate changes this morning amid a mixed trend,” said Jingyi Pan, market strategist at IG in Singapore. “Price movements here appear to be largely mirroring those in the US, with key corporate earnings due later in the week and could be the reason that investors are still holding onto equities.”
The heightened geopolitical risks come at a time when the global economy has shown steady improvement, led by the United States and encouraging momentum in export-reliant Asia.
Tokyo’s Nikkei closed 0.3 per cent lower, dragged down by a stronger yen.
Toshiba Corp was among the biggest decliners, ending the day 2.7 per cent lower, with the conglomerate expected to file its twice-delayed earnings results on Tuesday, without a full sign-off by auditors.
Accountants question the numbers at the company’s US nuclear subsidiary Westinghouse Electric Co, where massive cost overruns have pushed the Japanese parent company to the brink.
Chinese shares lost 0.4 per cent, while Hong Kong stocks slumped 0.9 per cent.
South Korean shares and Taiwan were also lower.
Australian stocks reversed earlier losses to climb 0.3 per cent, after a measure of business conditions hit the highest level in a decade.
They earlier hit their highest level since April 2015 for the second session in a row.
The Australian dollar was flat at $0.7501, paring earlier gains.
Overnight, Wall Street ended a choppy session little changed, weighed down by nervousness about quarterly corporate earnings later this week.
The depressed sentiment pulled 10-year US Treasury yields down to 2.3427 per cent on Tuesday from Monday’s 2.361 per cent close.
British Prime Minister Theresa May spoke on Monday with US President Donald Trump and agreed that “a window of opportunity” exists to persuade Russia to break ties with Syrian President Bashar al-Assad, May’s office said.
Trump is open to authorising additional strikes on Syria if the use of chemical weapons continues in the country, the White House said on Monday.
Investors are also nervous about the possibility of US military action against North Korea after the strikes in Syria.
A US Navy strike group headed toward the western Pacific Ocean near the Korean peninsula as a show of force, while South Korea’s acting president ordered the military to intensify monitoring of the North’s activities.
China and South Korea agreed on Monday to tougher sanctions on North Korea if it carries out nuclear or long-range missile tests.
In France, polls for many weeks have been showing centrist Emmanuel Macron and far-right leader Marine Le Pen on track to top the first round of voting on April 23 and go through to a May 7 runoff.
While Le Pen’s plans to ditch the euro and hold a referendum on European Union membership have spooked many investors, recent polls have pointed to a tighter race, with support for far-left candidate Jean-Luc Melenchon surging recently.
That has sent the spread between German and French 10-year government bonds soaring to the widest since February 22.
“After Britain’s Brexit referendum and the US presidential election surprised markets in 2016, could this event do the same-,” Mark Burgess, global head of equities at Columbia Threadneedle in London, wrote in a note.
“As a Le Pen presidency is perceived to increase the likelihood of France’s withdrawal from the EU, the uncertainty is likely to continue about what this could mean for the euro, along with a potential wider hit to global markets.”
The euro pulled back 0.1 per cent to $1.0587, ahead of data including German economic sentiment, UK price inflation and Eurozone industrial production later on Tuesday.
The dollar fell 0.3 per cent to 110.65 yen, extending losses from Monday.
The dollar index, which tracks the greenback against a basket of major trade-weighted peers, was flat at 101.03, failing to rebound from Monday’s 0.16 per cent loss. Federal Reserve Chair Janet Yellen said the central bank’s plans to raise interest rates gradually are aimed at maintaining employment and inflation rather than boost growth.
— Reuters
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