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Asia: Shares fall after Europe turmoil; Australian bonds advance

Tuesday, December 20, 2016 - 10:38

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[SYDNEY] Asian shares declined as geopolitical concerns intensified after the assassination of Russia's ambassador to Turkey and violent incidents in Germany and Switzerland. The US dollar bounced back against the yen as traders await the Bank of Japan's monetary policy decision.

Japanese equities fell for a second day, while futures indicated Chinese and Singaporean stocks may also open down. That came even as Australian shares climbed to follow gains for their US counterparts. Bonds rose in Australia and New Zealand after Treasuries gained the most in two weeks. Russia's envoy was gunned down in Ankara, Berlin police said at least nine people were killed after a truck rammed into a Christmas market, and a manhunt was under way in Zurich after a suspect shot people praying in an Islamic center.

The incidents added to a sense of geopolitical uncertainty after China last week seized a US naval drone and fighting escalated in Syria. Equities have struggled to add to a month-long, post-election rally that took major American benchmarks to records, with investors favouring haven trades again after a bond rout left Treasury yields at the highest since 2014. Market reactions were exacerbated this week as volumes thin out before year-end holidays.

"Markets are a bit overbought, we've seen huge gains since the election of Donald Trump," said Shane Oliver, AMP Capital Investors head of investment strategy, speaking with Yvonne Man and Ramy Inocencio on "Bloomberg Daybreak: Asia." "At some point we will see a bit of a pullback. I suspect that's probably going to come some time in the first two months of the New Year. The real issues will be tension between the US and China, and of course eurozone breakup risks which will come into focus with various elections across Europe over the next 12 months."

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Market voices on:

The BOJ on Tuesday concludes its first policy meeting since Mr Trump's victory last month helped trigger a surge in bond yields and a slide in the yen. All 39 economists surveyed by Bloomberg forecast no action from the BOJ.

The Topix Index fell 0.3 per cent as of 11am in Tokyo, while the Nikkei 225 Stock Average retreated for a second session after snapping a nine-day winning stretch.

The MSCI Asia Pacific Index was down 0.2 per cent, while the Shanghai Composite retreated 0.6 per cent and the Hang Seng Index headed for a fourth day of declines.

Australia's S&P/ASX 200 Index advanced 0.7 per cent and the Kospi rose 0.2 per cent in Seoul, while Singapore's benchmark added 0.2 per cent.

The S&P 500 Index rose 0.2 per cent to 2,262.56 in New York, trimming a gain that reached 0.4 per cent. The measure has advanced almost 6 per cent since the Nov. 8 election, while the Dow Jones Industrial Average is up 8 per cent.

The US dollar climbed 0.1 per cent to 117.22 yen, after declining 0.7 per cent in the previous session; the Australian currency rose 0.1 per cent to 72.53 US cents.

A broader Bloomberg gauge of the greenback was little changed, heading for a rally of more than 7 per cent this quarter.

The euro climbed 0.1 per cent to US$1.0417, holding its 0.5 per cent slide.

Yields on 10-year Australian government bonds fell three basis points to 2.83 per cent, while those on similar-dated New Zealand debt retreated three basis points to 3.42 per cent.

Yields on 10-year Treasury notes were up one basis point to 2.55 per cent after dropping five basis points on Monday.

Gold was little changed at US$1,138.78 an ounce, after advancing the previous two days as the US dollar weakened.

Oil declined 0.2 per cent to US$52 a barrel, after climbing 0.4 per cent.

Zinc fell 0.4 per cent, sliding for a third day.

BLOOMBERG

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