Asia: Markets take fresh hit as Europe crises brew

[HONG KONG] Asian markets broadly fell on Wednesday with confidence hit by worries over Donald Trump, while the euro struggled on uncertainty about France's political outlook and another crisis brewing in Greece.

Wall Street continues to touch record highs on hopes Mr Trump will enact business-friendly measures but Asian dealers are less sanguine following a series of outbursts that have included warnings of protectionism and labelling Japan and China trade cheats.

Against that background, traders are now growing increasingly concerned about rising populism across the world - particularly following Trump and Brexit - with far-right presidential candidate Marine Le Pen echoing many of the tycoon's themes.

There are also elections in Germany, Italy and the Netherlands this year, with similar issues in those countries fuelling worries the EU could break up.

Against this backdrop the euro sank Tuesday to US$1.0656, from highs above US$1.08 at the start of the week, and remained under pressure in Asia.

"While it is premature to draw any definitive conclusion, the political landscape in both France and Italy are coming under immense scrutiny from investors, which should keep euro upticks limited," said Stephen Innes, senior trader at OANDA.

"If we factor in a possibly divisive German election, risks are rising immensely on the European political stage." Greece's debt saga also reared its head after the International Monetary Fund warned the country would likely not reach targets laid out for it to qualify for bailout cash.

While Athens dismissed the report, the comments sent the cost of borrowing for Greece soaring on bond markets and raised the spectre of another crisis for the EU to juggle.

In Asian trade Tokyo gave up early gains to end the morning 0.2 per cent lower as the yen strengthens against the dollar.

Hong Kong slipped 0.6 per cent and Shanghai sank 0.5 per cent, with selling boosted by news China's foreign exchange reserves fell below US$3 trillion in January for the first time in six years as it battled to support the yuan in the face of huge capital outflows.

Analysts said that while the breach was not a big issue, the downward trend was a worry.

"In the current context of President Trump threatening to declare China a currency manipulator, and his clear desire for a weaker US dollar, China's reserves management and how that interplays with the (dollar-yuan) rate could be another flashpoint between the world's two biggest economies," Greg McKenna, chief market strategist at FX and CFD provider AxiTrader, added.

Seoul shed one per cent, Singapore gave back 0.5 per cent and Taipei, Manila and Jakarta also turned lower. However, Sydney edged up 0.2 per cent.

Oil prices extended losses after a reading showing US stockpiles soared last week, leading to worries a government report later Wednesday will also point to an increase.

Both main contracts fell around one per cent on Wednesday, a day after losing a little more than that.

AFP