Asian shares ease from record high; oil falls on virus case surge

Asian shares retreated from a record peak on Monday after a Reuters report the United States was preparing to impose sanctions on some Chinese officials highlighted geopolitical tensions, while oil prices fell on surging virus cases.

In a signal markets elsewhere would start weaker, eurostoxx 50 futures were 0.4 per cent down, futures for Germany’s DAX eased 0.3 per cent while those of London’s FTSE were flat. E-Mini futures for the S&P 500 slipped 0.2 per cent.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.1 per cent following four straight sessions of gains. The index hit a record high of 644.3 points early on Monday. It is up about 16 per cent so far this year, the best since a 33 per cent jump in 2017.

China's blue-chip index dropped 0.8 per cent, largely ignoring strong export data, while Hong Kong's Hang Seng was down 1.7 per cent. Japan's Nikkei declined 0.46 per cent while Australian shares were up 0.6 per cent. The sell-off began after Reuters exclusively reported, citing sources, that the United States was preparing sanctions on at least a dozen Chinese officials over their alleged role in Beijing's disqualification of elected opposition legislators in Hong Kong. The move comes as President Donald Trump's administration keeps up pressure on Beijing in his final weeks in office.

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“One thing that the market has been concerned about is that on his (way) out of office Trump would look for some retribution on China. So this news speaks to that fear,” said Kyle Rodda, market strategist at IG Markets in Melbourne. “At the end of the day, the market knows he only has six weeks left. The broader focus is still on vaccine roll-outs and US fiscal stimulus.”

Asian markets had initially started higher on hopes of a faster global recovery as coronavirus vaccines get rolled out, starting this week in Britain. US authorities will also this week discuss the programme before the expected first round of vaccinations this month. Hopes the vaccines will help curb the pandemic, which has so far killed more than 1.5 million people globally, sent shares soaring in recent weeks.

On Wall Street, stock indexes reached fresh all-time highs on Friday with the Dow rising 0.8 per cent, the S&P 500 gaining 0.9 per cent and the Nasdaq adding 0.7 per cent.

“The vaccine will break the link between mobility and infection rate, allowing for the strongest global GDP growth in more than two decades,” JPMorgan analysts wrote in a note, forecasting global growth of 4.7 per cent in 2021.

Still, expectations of a US stimulus aid package gathered pace after weak payrolls data last week, following months of deadlocked negotiations. The US economy added the fewest workers in six months in November, with nonfarm payrolls increasing by 245,000 jobs last month, much lower than expectations for a 469,000 increase. A bipartisan group of Democrats and Republicans proposed a compromise $0.9 trillion package that leaders on both sides appear open to agreeing to.

In currencies, investor focus is on a last-ditch attempt by Britain and the European Union to strike a post-Brexit trade deal this week, with probably just days left for negotiators to avert a chaotic parting of ways at the end of the year. If there is no deal, a five-year Brexit divorce will end messily just as Britain and its former EU partners grapple with the severe economic cost of the COVID-19 pandemic. The pound was a shade weaker at $1.3419 while the single currency was up 0.1 per cent at $1.2133, not too far from an April 2018 high of $1.2177.

The risk sensitive Australian dollar was up 0.1 per cent at $0.7433. That left the US dollar down 0.1 per cent at 90.702 against a basket of major currencies, after hitting a 2-1/2-year low last week. In commodities, oil prices slipped from their highest levels since March as a continued surge in coronavirus cases globally forced a series of renewed lockdowns, including strict new measures in Southern California.

US crude was off 24 cents at $46.02 per barrel and Brent was down 26 cents at $48.99. Brent has lost about a quarter of its value so far this year. Spot gold, which hit a record high of $2,072.49 an ounce, was last at $1,838.9, still up a hefty 21 per cent this year. – Reuters