Asia: Markets mixed as Huawei report offsets US earnings

[HONG KONG] Asian markets were mixed on Thursday as renewed concerns about China-US tensions overshadowed a positive lead from Wall Street following a better-than-expected round of corporate earnings.

The pound extended gains against the dollar after Prime Minister Theresa May survived a no-confidence vote as she prepares to draw up new proposals to leave the European Union that is palatable to a majority of MPs.

After a tumultuous December, global equities have enjoyed a broadly strong start to the year, largely thanks optimism China and the US will resolve their trade row.

But confidence took a knock on Wednesday from a report that said US officials were carrying out a criminal probe into Chinese tech giant Huawei and could soon indict the firm over allegations of theft of trade secrets from its US business partners.

Lawmakers have also introduced a bill to ban the export of American parts and components to Chinese telecom companies that are in violation of US export control or sanctions laws - with Huawei and fellow Chinese firm ZTE the likely targets.

"Huawei is effectively an intelligence-gathering arm of the Chinese Communist Party whose founder and CEO was an engineer for the People's Liberation Army," said Republican Senator Tom Cotton, one of the bill's sponsors.

The developments follow the arrest last year in Canada of Huawei's chief financial officer Meng Wanzhou, who is the daughter of the company founder and faces extradition to the US on Iran-linked fraud charges.

It also muddies the waters in trade talks between Beijing and Washington, which looked to be on a positive course after officials held three days of talks earlier this month, with both sides seemingly upbeat.

COST OF US SHUTDOWN

In early trade Hong Kong eased 0.1 per cent and Shanghai shed 0.3 per cent while Tokyo was down 0.2 per cent by the break and Singapore slipped 0.4 per cent.

But Sydney edged up 0.1 per cent while Seoul put on 0.2 per cent with Taipei, Wellington, Manila and Jakarta also in positive territory.

On Wall Street all three main indexes closed with gains after earnings reports from Bank of America and Goldman Sachs that overshot forecasts, while executives said they were confident the US economy was in rude health.

The Federal Reserve's closely followed "Beige Book" report pointed out that while political and trade uncertainty was weighing on business confidence, growth was continuing at a modest pace in most of the country.

However, there are increasing worries about the impact of the US government shutdown as it moves towards a fifth week, with Oxford Economics estimating it is slashing growth by US$700 million a week.

On currency markets the pound edged up against the dollar with dealers optimistic that Britain will not leave the EU without a deal in place, despite Mrs May's exit plan being thrown out by MPs Tuesday.

On Wednesday, she survived a no-confidence vote and is now planning her next move, with speculation swirling that the March 29 date for leaving will be delayed or another referendum will be called.

"Nothing has happened in the last 24 hours to dissuade us from the view that we are headed in the direction of an (exit) delay, softer Brexit... or no Brexit," said National Australia Bank strategist Ray Attrill.

AFP