Asia: Stocks slump on trade concerns; pound jumps

[TOKYO] Asian stocks fell on Monday after a reversal in US equities on Friday, amid concern over whether trade tensions with China can be mended. The pound jumped on news of further progress in Brexit negotiations.

Shares in Japan and Hong Kong underperformed and US equity-index futures dropped as optimism on a trade breakthrough at the end of last week tempered after White House economic adviser Larry Kudlow downplayed the potential for a quick deal.

Japan's Topix index fell 0.6 per cent as of 11:22am in Tokyo. Australia's S&P/ASX 200 was little changed while South Korea's Kospi index declined 1.6 per cent.

Hong Kong's Hang Seng Index fell 1.7 per cent while the Shanghai Composite Index was down 0.2 per cent.

S&P 500 Index futures lost 0.2 per cent. The S&P 500 Index closed down 0.6 per cent on Friday while the Nasdaq 100 Index fell 1.5 per cent.

In currency markets, the yuan pared losses as President Xi Jinping said China will further cut import tariffs. The offshore yuan slipped 0.1 per cent to 6.9025 per dollar.

The US dollar steadied, while 10-year US Treasury yields held gains from Friday's strong jobs report. The pound strengthened after the Times reported Theresa May has secured concessions from Brussels that'll allow her to keep all of Britain in a customs union with the EU and avoid a hard border in Northern Ireland.

The Bloomberg Dollar Spot Index was little changed. The euro traded at US$1.1388 while the pound gained 0.1 per cent to US$1.2988.

Politics, geopolitics and central banks will be the focus of the week for investors with the US midterm elections likely to dominate coverage early on, seen as a referendum on the policies of President Donald Trump. European traders will watch for further signs of progress on Brexit, with May due to discuss the latest proposals with her cabinet Tuesday. Investors then turn their eyes to the Federal Reserve, though officials are expected to keep the benchmark interest rate unchanged at their penultimate 2018 meeting Thursday.

"If you are overweight equities you might want to wait, if you are underweight equities it certainly gives you an opportunity to average in and buy a little bit more," Raymond Lee, managing director and portfolio manager at Kapstream Capital, said on Bloomberg Television. "As a bond manager, we are quite defensively positioned only because of some news that could come that is very hard to take a big conviction call - whether it's US midterm elections, how this trade war is going to play out."

Elsewhere, oil was on track for a sixth day of declines as sanctions on Iran oil snap back into place Monday. West Texas Intermediate crude lost 0.7 per cent to US$62.68 a barrel.

Gold was steady at US$1,232.83 an ounce.

BLOOMBERG