Asian shares inch higher, safe-haven assets give up overnight gains but growth worries cap gains; investor focus on monetary policy

Shanghai: Shares in Asia inched higher and safe-haven assets gave up some overnight gains on Tuesday, as investors paused for breath after a volatile Wall Street session, but deeper concerns about growth have capped broader improvements in risk sentiment.

Investor focus has shifted to monetary policy this week with Australia’s central bank all but certain to cut interest rates to a fresh low at its meeting on Tuesday and India also tipped to ease on Thursday.

Most equity markets in the region shook off Wall Street’s overnight weakness, which took the Nasdaq into correction territory. In early trade, MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.17 percent.

“Sentiment remains downbeat and the weakness across the board in purchasing managers indices, published Monday, helped to feed the anxiety surrounding the outlook for global growth,” analysts at ANZ said in a morning note.

US manufacturing growth slowed further in May to its weakest pace in more than two-and-a-half years, defying expectations for a modest rebound.

Australian shares were up 0.24 percent ahead of the expected interest rate cut by the Reserve Bank of Australia, as the bank hopes to revive growth.

But Japan’s Nikkei gave up early gains to turn down 0.29 percent.

 Asian shares inch higher, safe-haven assets give up overnight gains but growth worries cap gains; investor focus on monetary policy

A passerby walks past in front of an electric screen showing Asian market indices outside a brokerage in Tokyo, Japan. Reuters

On Monday, the Nasdaq fell 1.61 percent to 7,333.02, taking it more than 10 percent lower than its 3 May closing record, as fears that US antitrust regulators could target Alphabet, Facebook and dragged down shares in those companies.

The Dow Jones Industrial Average eked out a 0.02 percent gain to 24,819.78 and the S&P 500 lost 0.28 percent to 2,744.45.

The cautious gains in equities on Tuesday were accompanied by a rise in the yield on the safe-haven benchmark 10-year US Treasury, which had dipped to 2.0607 percent, its lowest level since September 2017, on Monday. On Tuesday morning in Asia, 10-year notes yielded 2.0934 percent, up from a US close of 2.081 percent on Monday.

The two-year yield turned higher, rising to 1.8597 percent on Tuesday compared with a US close of 1.84 percent. The yield had fallen earlier, reflecting raised expectations of a more accommodative Federal Reserve. St. Louis Fed president James Bullard on Monday said that a US interest rate cut “may be warranted soon” given risks to global growth posed by trade tensions and weak US inflation.

In further signs that investors’ nerves remain unsettled, gold gained 0.12 percent to $1,326.41 per ounce, just off a three-month high, and Japan’s yen strengthened, with the dollar dropping 0.18 percent against the Asian safe-haven to 107.87.

“Risk aversion has also been seen with the yen carry trade unwinding as the markets comprehend that the US technology containment strategy toward China is unlikely to reverse,” analysts at Jefferies said in a note.

“In the short term, positioning has become so bearish that ‘a ceasefire’ could spark a risk rally.”

The euro was 0.08 percent stronger at $1.1249, while the dollar index, which tracks the greenback against a basket of six major rivals, was up 0.05 percent at 97.186.

Crude prices rebounded after dropping on Monday on mounting trade worries.

US crude gained 0.3 percent to $53.41 a barrel and Brent crude rose 0.18 percent to $61.39 per barrel.

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Updated Date: Jun 04, 2019 07:57:00 IST