GLOBAL MARKETS-Stocks take a breather as Brexit, U.S. stimulus talks stall

  • 12/10/2020
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* MSCI Asia ex-Japan index slips 0.34%; dollar steadies * S&P 500 futures pare early gains * Uncertainty around Brexit and stimulus keeps investors sidelined * Asian stock markets: tmsnrt.rs/2zpUAr4 SINGAPORE, Dec 10 (Reuters) - Asian equities eased from record highs on Thursday as stalled U.S. stimulus talks and a sell-off in tech stocks weighed, while sterling traders sat on a knife’s edge as last-ditch Brexit negotiations yielded only an agreement to keep talking. MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.34%. Japan’s Nikkei erased early losses to trade 0.1% lower. Both are up more than 60% from March lows. S&P 500 futures meanwhile pared early gains and steadied in Asian afternoon trade. U.S. Treasuries rose while the dollar slightly eased after a volatile overnight session in currency markets, with traders now looking ahead to a European Central Bank monetary policy meeting. Sterling teetered at $1.3366 as it awaits a Brexit resolution. “We’ve risen so far so fast that it’s making investors cautious,” said Michael McCarthy, chief strategist at stockbroker CMC Markets in Sydney. “The fall in tech stocks was a bit of a concern, given that they’ve risen in all market weather over the last six weeks, so to see them come off might signal that we’re looking at a short term corrective move.” A near 2% drop in the Nasdaq on Wednesday was driven by a 1.9% fall in Facebook shares after U.S. regulators filed lawsuits alleging the company used its dominance to buy or crush rivals, harming competition. Meanwhile, S&P Dow Jones Indices said on Thursday it would remove ten Chinese companies from its equities indices and several others from its bond indices. This move comes after a Trump administration order to prohibit purchases by U.S. investors of certain Chinese securities. Index provider FTSE Russell did the same last week. Cautious trading in Asia came amid widespread uncertainty surrounding long-running U.S. pandemic relief negotiations and talks between Britain and the European Union over trade arrangements post Brexit. U.S. lawmakers approved a stopgap government funding bill on Wednesday, but were unable to sort out disagreements over aid to state and local governments that are holding up a broader spending package. British and EU leaders meanwhile gave themselves until the end of the weekend to seal a new trade pact, with some $1 trillion in annual trade at risk of tariffs if they can’t reach a deal by Dec. 31, when transition arrangements end. British and European futures slipped marginally in Asia, with FTSE futures little changed and EuroSTOXX 50 futures down 0.14%. Investor focus will shift towards a European Central Bank meeting later on Thursday, where the central bank is expected to unveil more bond buying and cheap loans. Traders are also looking to see whether the ECB will say anything about a near 14% rise in the common currency from March lows, which is hindering Europe’s exporters. “We do not think there will be an explicit talking down of the euro, but expect ECB Chief (Christine) Lagarde to mention the central bank is keenly monitoring the currency strength,” analysts at Singapore’s OCBC Bank said in a note. Elsewhere, faith in the recovery appears to be holding up, with oil prices steady despite a build-up in U.S. inventories. Brent crude futures last sat 0.27% firmer at $49.13 a barrel and U.S. crude was up 0.29% at $45.81 a barrel. Gold nursed losses at $1,839 an ounce. Treasuries traded firmly owing to uncertainty around U.S. stimulus wrangling, and the yield on benchmark U.S. ten-year bonds fell 1.2 basis points to 0.9278%. “The uncertainty around the timing is less important than the uncertainty around the overall size of the package, which depends primarily on the outcome of the Senate runoffs in Georgia on January 5,” Goldman Sachs analysts said in a note. “For now, our assumption is a $700 billion COVID relief package,” they said, adding it would be upgraded to between $1 trillion and $1.5 trillion if Democrats win the two seats.

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