TOKYO, Jan 11 2018 : The New Year rally in Asian shares ran out of steam today as concerns about the U.S. administration’s protectionist stance hit Wall Street while U.S. bonds were dented by speculation China may curtail buying.
MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.1 percent in early trade, slipping further from Tuesday’s 10-year peak. Japan’s Nikkei lost 0.6 percent.
U.S. shares snapped their New Year rally yesterday while the Canadian dollar and the Mexican peso fell after a Reuters report said Canada increasingly believes that U.S. President Donald Trump will soon announce his intention to withdraw from the North American Free Trade Agreement treaty.
U.S. bond prices tumbled, boosting the benchmark 10-year Treasuries yield to a 10-month high of 2.597 percent after Bloomberg reported that China, the biggest foreign holder of U.S. Treasuries, could slow or stop buying government bonds.
“I would think that China is flexing its muscles as the United States is looking into measures to deal with its trade deficit with China,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.
Investigations into U.S. imports are due to report to Trump this month, including probes into whether imports of steel and aluminum threaten U.S. national security. A separate probe into Chinese intellectual property practices may also conclude as early as this month, Axios reported, and could result in tariffs on the country’s consumer-electronics exports.
U.S Treasuries later pared some of their losses and the 10-year yield stood at 2.555 percent in early Asian trade.
The speculation that China may reduce its buying in U.S. bonds helped to underpin the euro, the most obvious alternative assets to the dollar.
The euro traded at $1.1950, extending its rebound from Tuesday’s low of $1.1916.
Against the yen, the dollar posted a even bigger fall of 1.1 percent yesterday, its largest decline in almost eight months.
It last stood at 111.40 yen, after hitting a six-week low of 111.27 yen the previous day.
The yen has been buoyed this week after a cut in the Bank of Japan’s bond buying on Tuesday fueled speculation that the central bank could eventually seek to exit from its stimulus later this year, following in the footsteps of other major central banks.
The Canadian dollar traded at C$1.2559 per U.S. dollar after having lost 0.7 percent yesterday.
U.S. West Texas Intermediate (WTI) crude futures traded at $63.47 per barrel, after hitting a high of $63.67 in the previous session, their loftiest level since December 2014.
Brent crude futures settled at $69.20 a barrel yesterday, up 38 cents. The session high for the global benchmark was $69.37, highest since May 2015. – Reuters