Asian traders dip at break ahead of key global events
Asian stocks inched higher on Wednesday but investors remained noticeably risk averse, with gold and sovereign debt set for a second day of solid gains ahead of several major political and economic events later this week.
With UK elections, a European Central Bank policy meeting where policymakers may take a less dovish stance, and former FBI director James Comey’s Senate testimony all set for Thursday, market participants will be wary of making big bets.
Adding to the sense of unease is a brewing crisis in the Middle East, where Saudi Arabia, the UAE and Egypt cut off ties and transport links to Qatar citing its support for extremism.
There are worries the spat could turn into a wider conflict that takes in Qatar ally Iran, with Trump wading into the row in a series of tweets signaling support for Riyadh on the issue.
After a recent rally, trading floors have quietened as dealers take a wait-and-see attitude, lifting safe-haven assets such as the yen and gold.
Greg McKenna, chief market strategist at AxiTrader said there seems to be a little bit of nervousness in the market over Comey’s testimony. Whether it is geopolitics and the Middle East, worries about James Comey’s testimony, the ECB, or UK election, traders backed off a little overnight.
The yen held at the 90.50 range against the dollar, more than 1.5 percent stronger than last week, while gold was hovering around seven-month highs. The two are considered safe bets in times of uncertainty.
On equity markets Tokyo’s Nikkei was down 0.3 percent by the break as the strong yen hurt exporters, while Seoul slipped 0.1 percent and Wellington lost 0.7 percent.
Sydney shed 0.1 percent following data showing Australia’s economic growth slowed sharply in the first quarter and missed expectations.
However, Shanghai was up 0.7 percent, Hong Kong added 0.1 percent and Singapore put on 0.3 percent.
On currency markets the pound is holding up against the dollar ahead of the British vote.
Sterling has come under pressure in the past few weeks as Prime Minister Theresa May’s ruling Conservatives have seen their once-commanding lead almost wiped out by the opposition Labour Party, raising worries about uncertainty just weeks ahead of Brexit negotiations.
The euro also remains in good health following a string of positive indicators out of the Eurozone, led by Germany, and expectations the ECB will start to tighten monetary policy soon possibly Thursday.