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Asian markets cautious in face of geopolitical risks

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[HONG KONG] Asian markets moved cautiously Wednesday as global geopolitical risks continued to gnaw at investor sentiment following last week's US missile strike on Syria and soaring tensions on the Korean peninsula.

Dealers remain on edge over a brewing crisis following the attack that has damaged ties between the US and Russia over Moscow's backing for Syrian President Bashar al-Assad.

US Secretary of State Rex Tillerson flew to Moscow on Tuesday to confront the Kremlin about its support for Assad, following a US strike last week that Washington said was in retaliation for a chemical attack that killed dozens.

Risks are also rising on the Korean peninsula with US President Donald Trump warning that Washington was prepared to "solve the problem" of a nuclear-armed North Korea on its own if necessary.

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Trump's comments came as a US naval strike group headed towards the region, a show of force that prompted the North to declare it was "ready to react to any mode of war desired by the US".

The rising uncertainty has seen a surge in safe-haven investments, with the yen climbing to five-month highs against the dollar.

Tokyo ended the morning 1.2 per cent lower, with a stronger yen hitting exporters, while Hong Kong and Sydney lost 0.2 per cent. Sydney and Singapore also registered losses.

But Shanghai and Seoul added 0.1 per cent, with positive news for the world's second-largest economy as government data showed a jump in prices for goods at the factory gate in March, suggesting strengthening demand.

Tokyo stocks were down across the board, with Toshiba declining 1.02 per cent after it reported an unaudited loss of US$4.8 billion in long-overdue financial results for the nine months to December 2016.

Toshiba also warned that its financial situation would likely worsen and said its survival was at risk.

"The reality is there is a sense of risk aversion rising in markets," said Greg McKenna, chief market strategist at CFD and FX provider, AxiTrader.

"The worry is the rhetoric is heating up between the US and North Korea," he said.

On oil markets both main contracts saw further gains following Friday's attack in Syria, which raised speculation about the impact on exports from the crude-rich Middle East.

The successful implementation of a landmark Opec deal to reduce a worldwide glut in oil that had depressed prices also contributed to gains.

At the end of November, the Organization of the Petroleum Exporting Countries agreed to cut output by 1.2 million barrels per day from January 1, initially for a period of six months.

"Reports say that Opec compliance in March is up to 104 per cent of planned production cuts. Separately there are reports that the Saudis now want an extension to the production cuts," McKenna said.

AFP

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