Asia shares, S&P futures fall as Trump travel ban, weak GDP adds to US worries

Jan 30, 2017

bloombergdollar

Asian stock markets and US stock futures retreated on Monday after President Donald Trump introduced immigration curbs that sparked criticism at home and abroad and added to global fears of increasingly unpredictable US policies.

Trump on Friday put a 120-day hold on allowing refugees into the country, an indefinite ban on refugees from Syria and a 90-day bar on citizens from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen.

The executive order led to the detention and deportation of hundreds of people arriving at US airports, huge protests in many US cities and a raft of legal challenges amid confusion over its implementation.

Trump defended the move as vital for US security, but his critics have said his action violated US law and the Constitution.

MSCI’s broadest index of Asia-Pacific shares outside Japan and Japan’s Nikkei both slid 0.5 per cent early on Monday.

S&P e-mini and Dow futures < ESv1> opened down 0.3 per cent, while Nasdaq futures started trading about 0.2 per cent lower.

“First the market has gone up strongly since the (presidential) election. So it is ripe for a correction and is extended in valuation metrics,” said David Kotok, chairman and chief investment officer of Cumberland Advisors.

“For these current market prices to be justified, the Trump agenda must unfold perfectly,” Kotok added. “But the reverse is under way and fragmented policy combined with obfuscation is now a growing detriment to growth acceleration.”

Several countries including long-standing American allies criticised Trump’s directive as discriminatory and divisive, and tens of thousands of people rallied in US cities and at airports on Sundays to express their outrage.

US judges in at least five states blocked federal authorities from enforcing Trump’s executive order, but lawyers representing people affected said some authorities were unwilling on Sunday to follow the judges’ rulings.

The dollar index, which tracks the greenback against a basket of trade-weighted peers, dipped about 0.2 per cent to 100.30 in early Asian trade.

The dollar also weakened almost 0.4 per cent to 114.63 yen on Monday, pulling further away from a one-week high hit Friday.

Adding to pressure on stock markets, data on Friday showed US economic growth slowed more than expected in the fourth quarter, with GDP rising at a 1.9 per cent annual rate, below the 2.2 per cent rise expected by economists and the 3.5 per cent growth pace logged in the third quarter.

Earnings disappointments also weighed, led by Chevron, whose quarterly profit missed expectations, and Starbucks, which trimmed its full-year revenue forecast.

But the impact across Asia may be delayed, with China, Hong Kong, Taiwan, South Korea, Singapore and Malaysia shut on Monday for the long Lunar New Year holidays.

While US policies are causing some nervousness, investors in Asia will also focus on the Bank of Japan’s policy meeting on Tuesday as well as manufacturing and services activity surveys out of China on Wednesday.

Markets will also be watching US manufacturing data and the Federal Reserve meeting’s outcome on Thursday, and Friday’s non-farm payrolls figure.

In commodities, oil started the week on a negative note, extending declines on signs on growing output in the U.S. that looks set to offset supply cuts by the Organization of Petroleum Exporting Countries and other producers.

US crude retreated 0.3 per cent to US$53.02 (RM234.96) a barrel, adding to Friday’s 1.1 per cent slide.

Gold shone amid the pullback in risk markets. Spot gold added almost 0.3 per cent to US$1,193.10 (RM5,287.22) an ounce. –Reuters

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