Talking Points:

  • Asian stocks have been slammed across the board
  • The Nikkei shed 2.3% with Shanghai seemingly set for even greater losses
  • A procedural issue forced yet another US government shutdown, but this looks unlikely to last

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Asian stocks were hammered once again Friday after another horrible Wall Street session reverberated around the globe.

Once again fears of higher US interest rates and worries about stretched valuations seem to be doing the damage but news of another Federal Government shutdown which broke in Asian hours can’t have helped. Republic Senator Rand Paul demanded a debate on his amendment to the spending bill which would retain certain spending caps. This meant that the bill failed to pass before Federal funding ran out, causing the second shutdown after January’s three-day hiatus.

This one probably won’t last as long –procedural measures are already under way to end it- but still, two shutdowns in as many months don’t speak very hopefully about the current State of the US legislature.

In any event Asian dealing screens were a sea of red with the Nikkei 225 down by 2.3%, the ASX off by 0.89% and the Shanghai Composite down by nearly 5% heading into its own close.

The currency markets were a little calmer. The Japanese Yen caught its customary haven bid and neared a four-month high against the US Dollar before slipping back. The Australian Dollar started the session weaker. A quarterly monetary policy report from the Reserve Bank of Australia stuck largely to a well-worn script of cautious optimism tempered by warnings about the consequences of too much currency strength. However the markets have often heard all this before, from the RBA and it’s more likely that weak home-loan data released at the same time was what hit the Aussie.

Gold prices firmed up, again on a haven bid, while crude oil prices looked set for a sixth day of gains as market-oversupply worries ramp up once more.

Still to come Friday are plentiful UK economic data which will range from official industrial and manufacturing figures through to construction output and the December trade balance. Canada’s unemployment numbers for January are coming too.

--- Written by David Cottle, DailyFX Research

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