Risk sentiment remained muted in Asian trading on Tuesday, with Asian shares mixed as the focus remained on the US bailout and the brexit situation.
Australia’s ASX200 closed up 0.19%; Japan’s Nikkei 225 index closed 0.3% lower; South Korea’s KOSPI index closed down 1.62%. A shares were mostly pressured lower.
After the rally since November, the market looks in desperate need of a breather. Given the end of the year, this may be appropriate and may require some positioning as well as dollar financing needs.
The number of coronavirus cases in the US continues to rise as California, the country’s most populous state, announces new travel and business restrictions. New York officials warned that similar restrictions could soon be imposed. That puts even more pressure on the U.S. recovery.
The move comes as traders keep a close eye on talks about additional fiscal stimulus. The U.S. Congress will vote on a week-long emergency funding bill this week to buy time for lawmakers to negotiate a deal to provide COVID-19 aid and a comprehensive spending bill to avert a government shutdown.
The us leaders of both parties agreed to a $908bn rescue package as the basis for negotiations failed to release details on Monday as expected as republican and Democratic negotiators remained divided on several details, raising concerns about the plan’s future.
Sources close to the Democratic Party said the two sides disagreed on how to allocate $160 billion in local government grants, exemptions for businesses and whether they should include a direct $1,200. The two sides are also examining whether to tie the bailout bill to a $1.4 trillion spending bill for 2021.
“The S&P 500 and Dow Jones industrial average have weakened a bit, but are still at record highs,” said Tom Piotrowski, market analyst at CommSec. “It’s a question of finding the next stimulus for these markets.”
In currency markets, the major currencies were largely unchanged as the old themes of the week continued to play out. The dollar remained in a weak position, retreating slightly in late trade yesterday. All the focus was certainly on Brexit, which sent the pound tumbling more than 200 points at one point yesterday, with the pair trading around 1.3345.
The British prime minister Boris Johnson will travel to Brussels this week in a last-ditch effort to strike a deal to leave the European Union. He will meet the President of the European Commission Ursula von der Leyen after negotiators failed to make significant progress when they resumed talks on Monday.
“The concern is that Johnson is not going to come back from Brussels empty-handed,” said Chris Weston, head of Pepperstone Research, a Melbourne brokerage.
He said the pound could drop back to $1.30 if no deal was reached by Thursday’s EU summit, but there was speculation there might be joint concessions to reach a deal. “I am confident that there will be substantial progress in this meeting, which could trigger some short covering of no deal bets.”
In other UK news, the Novel Coronavirus vaccine, developed by Pfizer and BioNTech, will be launched in the UK on Tuesday, making it the first European country to launch a full coronavirus vaccination programme
In commodities, expectations of a US rescue plan boosted gold prices, pushing above $1,870 during the day after a slump that appeared to have formed a short-lived bottom. At the same time, silver day to maintain the upward trend.
“The stimulus package has helped stabilize the gold market, as pumping more money into the financial system could spark inflation,” said Jim Wyckoff, a senior analyst at Kitco Metals.
In addition, tensions between China and the U.S. are likely to continue to provide some support for gold prices. The US Treasury Department on Monday morning announced sanctions against 14 officials of China’s National People’s Congress for “related to the disqualification of Members of the Hong Kong Legislative Council”.
Separately, the U.S. House of Representatives on Monday passed the Hong Kong People’s Freedom and Choice Act of 2020, which provides certain political asylum for Hong Kong residents. The bill then goes to the Senate for consideration and is due to be signed into law by the president before the Christmas recess.
It is seen as an attempt by the outgoing Trump to cement his legacy of China repression and to define Washington’s tough stance toward Beijing ahead of Biden’s inauguration on January 20, 2021.
Trend analysis of major currencies:
Euro: EurUSD traded in a narrow range near 1.2115 after two days of losses. On a technical level, the daily MACD red momentum column weakened slightly, with the RSI indicator trading below the overbought level and the KDJ indicator trying to move down from the overbought level to indicate price or high consolidation. Short-term initial support at 1.2075, initial resistance at 1.2165.
Sterling: The pound fluctuated sharply against the DOLLAR yesterday, falling more than 200 points at one point, but remained down for the day and was trading near 1.3335 to keep an eye on brexit news. On a technical level, the daily MACD green momentum column is emerging, with the RSI indicator hitting a low of 50 and the KDJ indicator falling from the overbought level, indicating a price or volatility move lower. Short-term initial support at 1.3300, initial resistance at 1.3400.
Yen: Dollar/Yen continued the momentum of the previous shock, the trading range has been narrowing. From a technical point of view, the daily chart MACD red kinetic energy column is very weak, the RSI indicator is hovering around the 50 levels, the KDJ indicator is holding steady around the 50 levels, the price is expected to maintain the box shock. Short-term initial support at 103.80, initial resistance at 104.35.