Talking Points:
- Asia shares wilted as investors preferred to own perceived haven assets
- The US Dollar wasn’t one of them, it wilted too after the Federal Reserve’s policy meet
- Australian trade surplus smashed records
Asian shares found the going tough on Thursday, with perceived haven plays on top as the new US administration stretched its wings again.
Markets had hoped for a raft of fiscal stimulus from President Donald Trump but controversial comments and executive orders are dampening enthusiasm. The shock of his travel ban against citizens of seven Middle Eastern countries still reverberates, despite polls showing that this has more public backing at home in the US than opposition.
On Thursday came reports of tension between Trump and Australian Prime Minister Malcom Turnbull expressed during a weekend phone call. Australia and the US have been strong allies in the entire post-war period, but Trump apparently criticized a US/Australia refugee deal struck under Barack Obama. The administration had also admonished Iran for a missile test and said Tehran was “on notice.”
The Nikkei 225 fell 1.2%, with a stronger Yen weighing on the play. The Federal Reserve left interest rates alone on Wednesday, as had been expected. But its accompanying statement was interpreted as perhaps a touch more dovish than the markets had thought might be the case and the US Dollar suffered as a result, albeit not greatly.
In Australia, the ASX 200 closed down 0.14%, with the index’s gold miners sparing its blushes yet again. Gold prices added nearly 0.6% to trade well above the $1200 point it broke above on Wednesday. Australia posted a record trade surplus in December, according to official figures, raising hopes that fourth quarter growth will be enough to head off the threat of recession.
Crude oil prices fell back a little in the Asia session, having risen on Wednesday after the US rebuked Iran.
For the rest of global Thursday, markets will likely focus on the UK, and specifically the Bank of England. It will make its February monetary call and release the crucial inflation report that gives clues to current thinking and future action. Governor Mark Carney will also speak at a press conference to discuss both. No change is expected to the policy settings but in these post-Brexit-vote days, all comment likely to affect Sterling markets is at a premium.
After all that, US weekly jobless claims will grab investor attention.
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--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
