HONG KONG, May 4 — Asian markets fell today, tracking another retreat on Wall Street as attention turns to the release of key US jobs data later in the day and high-level China-US trade talks in Beijing.
While the corporate earnings season has been considered a success, analysts are worried that the healthy results have not fired equities as much as expected, with warnings of a mild correction down the line.
The major macroeconomic event this week is today’s US non-farm payrolls figures for April, which will provide the latest snapshot of the world’s top economy. Analysts will be watching wage growth figures closely for signs of rising inflation.
There are growing concerns that with the US continuing to perform well, the Federal Reserve could be forced to lift interest rates three more times this year, having done so once already.
This, along with the fading likelihood of any near-term tightening by the European Central Bank and the Bank of England, has boosted the dollar over the past week to multi-month highs against the euro and pound, as well as most other currencies.
“The dollar should continue to make gains against currencies across the board if fundamentals and central bank policy divergence matters,” said Greg McKenna, chief market strategist at AxiTrader, said.
“I believe it does and I can see a clear slowdown in growth globally at a time when the US seems to be the standout. And with inflation accelerating in the US but lagging elsewhere we have a clear policy divergence between the Fed and many other central banks.
“For me, that means that whatever happens with non-farms tonight... we are at the start of a big turn in the dollar.”
‘Very good’ trade talks
In Beijing, the biggest hitters in Donald Trump’s administration are meeting their Chinese counterparts to discuss the tariff spat between the two sides, which has fuelled fears of a potentially damaging trade war.
Treasury Secretary Steven Mnuchin and top White House economic adviser Peter Navarro, a prominent China critic, are in the delegation, though both sides have downplayed any chances of an early breakthrough.
Xi Jinping’s top economic adviser Vice Premier Liu He is leading the talks for China.
The two sides were having “very good conversations”, Mnuchin told reporters before leaving his hotel this morning.
The meeting is the latest attempt to ease trade tensions after Trump sparked a series of tit-for-tat threats of tariffs on goods worth billions of dollars.
With uncertainty hanging in the air, investors are keeping to the sidelines. Hong Kong fell 1.3 per cent, Shanghai ended down 0.3 per cent and Sydney slipped 0.6 per cent.
Seoul shed more than one per cent and Singapore was off 0.8 per cent, while there were also losses in Manila and Jakarta. However, Wellington and Taipei edged up.
Tokyo was closed for a public holiday.
Oil markets are also awaiting Trump’s decision on the Iran nuclear deal, with speculation rife that he will tear it up, which many fear could spark geopolitical turmoil and put fresh upside pressure on crude prices.
Both main contracts are sitting around levels not seen since late 2014, though data showing rising US production and stockpiles is tempering strong rises.
Sukrit Vijayakar of Trifecta Consultants said markets “were also a bit concerned by a report from the International Monetary Fund which said it had censured Venezuela for failure to provide timely economic data”.
He said “the fear was that such failure to comply could lead to further sanctions” on the major oil producer.
In early European trade, London and Frankfurt rose 0.4 per cent while Paris was 0.1 per cent higher.
Key figures around 0810 GMT
Hong Kong – Hang Seng: DOWN 1.3 per cent at 29,926.50 (close)
Shanghai – Composite: DOWN 0.3 per cent at 3,091.03 (close)
Tokyo – Nikkei 225: Closed for a public holiday
London – FTSE 100: UP 0.4 per cent at 7,529.41
Euro/dollar: DOWN to $1.1969 from $1.1990 at 2100 GMT
Pound/dollar: DOWN to $1.3556 from $1.3571
Dollar/yen: DOWN to 109.10 yen from 109.19
Oil – West Texas Intermediate: DOWN six cents at $68.37 per barrel
Oil – Brent North Sea: DOWN four cents at $73.58 per barrel
New York – Dow: FLAT at 23,930.15 (close)