The pound won support after opposition Labour Party leader Jeremy Corbyn said he would back a second EU referendum if his own Brexit plan failed to win parliamentary backing (Aris Oikonomou)
Hong Kong (AFP) – Asian markets fell Tuesday as investors struggled to maintain momentum from the previous day’s trade talks-fuelled surge, while the pound extended gains following reports of a possible Brexit delay.
Donald Trump’s decision to waive this week’s deadline for China-US negotiations and his upbeat tone on their progress lit a fire under regional equities Monday on hopes the long-running dispute could be nearing its end.
However, while dealers are hopeful the two sides will reach an agreement, there is some scepticism about how much they can resolve, while some observers warned that failure to meet market expectations could lead to a sharp drop in global equities following a strong start to the year.
“The emerging shape and tone of the negotiations do not portend a resolution of many pending issues per se,” said Aninda Mitra, an analyst at BNY Mellon Investment Management.
“Notwithstanding the relief in Chinese markets and an expected improvement in global risk sentiment, the bilateral trade relationship will remain complicated.”
Shanghai sank 0.7 percent Tuesday after the previous day’s 5.6 percent surge, while Hong Kong slipped 0.8 percent in the afternoon and Tokyo ended down 0.4 percent.
Sydney sank almost one percent and Singapore was 0.4 percent off, with Seoul 0.3 percent lower, Wellington down 0.2 percent and Taipei flat.
Manila and Jakarta were both down while Mumbai gave up 0.6 percent and the rupee dropped a similar amount following news that Indian warplanes had crossed into Pakistani airspace across the ceasefire line in Kashmir and dropped payloads.
New Delhi later said an air strike had been carried out on a camp where militants were preparing an attack on India, almost two weeks after more than 40 Indian paramilitaries were killed in the region.
– Crude drops further –
On currency markets, sterling rose further after a report that Prime Minister Theresa May is considering putting off the March 29 deadline for Britain to leave the European Union if she is unable to push her own deal through parliament, in a bid to avert a painful no-deal divorce.
“Following the report, a possibility emerged that the UK parliament and the government will move towards extending the deadline, and that sent the pound to the highest level since January against the dollar, and the highest against the yen this year,” Mizuho Securities said in a commentary.
Adding upside to the currency was news the opposition leader Jeremy Corbyn announced the Labour Party would support a second referendum on leaving the bloc if its own plan for Brexit is not approved.
Oil saw further losses in Asia, having tanked more than three percent after Trump again called on OPEC to help slash “high” prices.
The commodity has been on a roll in recent weeks on hopes for the trade talks, output cuts by OPEC and other major producers including Russia, and US sanctions on Venezuelan exports.
However, the president’s tweet — the latest hitting out at the oil majors — sparked a sell-off in the market, though analysts indicated prices could bounce back.
“We might see a less aggressive stance on supply cuts from the Saudis — this might stop them from cutting deeper,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich.
“But I still think Saudi Arabia has the incentive to see higher oil prices, and deliver the cuts agreed in December” with other OPEC members.
Eyes will be on Washington, where Federal Reserve boss Jerome Powell will face lawmakers, with his comments being pored over for clues about the central bank’s monetary policy plans.
– Key figures around 0710 GMT –
Tokyo – Nikkei 225: DOWN 0.4 percent at 21,449.39 (close)
Shanghai – Composite: DOWN 0.7 percent at 2,941.52 (close)
Hong Kong – Hang Seng: DOWN 0.8 percent at 28,732.24
Euro/dollar: DOWN at $1.1356 from $1.1360 at 2140 GMT
Pound/dollar: UP at $1.3130 from $1.3098
Dollar/yen: DOWN at 110.81 yen from 111.05 yen
Oil – West Texas Intermediate: DOWN 22 cents at $55.26 per barrel
Oil – Brent Crude: DOWN three cents at $64.73 per barrel
New York – Dow: UP 0.2 percent at 26,091.95 (close)
London – FTSE 100: UP 0.1 percent at 7,183.74 (close)
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