Asian shares took a breather on Friday, slipping from 1-1/2-year highs as material shares were hit by sudden falls in copper and other commodity prices while investors assessed Washington’s stance on tax and currency policies. U.S. President Donald Trump called China “grand champions” of currency manipulation, doing little to raise confidence on trade relations between the world’s two biggest economies. Markets appeared to take his comments in stride, as they were made just hours after his new Treasury secretary pledged a more methodical approach to analysing Beijing’s foreign exchange practices. “With Mnuchin officially sworn in, from now on, I suspect most comments on foreign exchange policies come from him. And he has said a strong dollar is in U.S. interests,” said Shuji Shirota, head of macroeconomic strategy group in Tokyo at HSBC Securities.
The offshore yuan stood little changed at 6.8545 per dollar. The yuan was emerging Asia’s worst performer last year, even as Beijing tried to stem its fall, sliding around 6.6 percent in its biggest drop in over 20 years onshore. MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.5 percent, giving back part of this week’s gains, though it is likely to log its fifth straight week of gains. Australian material shares were the biggest drag as they were spooked by big falls in the price of copper, iron ore and other commodities. Hong Kong’s Hang Seng dropped 0.5 percent while China’s mainland shares fell 0.4 percent. Japan’s yen-sensitive Nikkei was off 0.2 percent.
The MSCI world equity index, which tracks shares in 46 nations, rose 0.15 percent to 446.69 on Thursday, touching a record peak at 447.67 at one point and extending its gains so far this year to almost six percent. Leading the gains were emerging markets, which have rallied more than 10 percent since the start of the year, thanks to signs of a pick-up in global economic activity and a rebound in commodity prices. On Wall Street, the Dow managed to notch a record high for a tenth straight session, the longest streak since 1987. The streak of gains is the longest for the index since March 2013.
Traders have bet on tax cuts, less regulation and more infrastructure spending from Trump and the Republican-controlled Congress to bolster the U.S. economy. “There are strong expectations on tax cuts in the U.S. markets. On the other hand, the chance of a Fed rate hike in March seems limited, which is also helping shares,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management. U.S. Treasury Secretary Steven Mnuchin on Thursday laid out an ambitious schedule to enact tax relief for the middle class and businesses by August, but added the Trump administration was still studying a border tax.
As Trump has promised a “phenomenal” plan by early March to cut business taxes, many investors expect more clarity when he delivers a speech to Congress on Tuesday. Wednesday’s Federal Reserve minutes, which showed that there was less urgency among voting members to raise interest rates, have helped to drive down U.S. Treasury yields and the dollar. The yield on 10-year U.S. Treasuries hit a two-week low of 2.372 percent.
The dollar slipped to 112.55 yen, also a two-week low, on Thursday and last stood at 112.85 yen. The euro fetched $1.0574, off Wednesday’s six-week low of $1.0494. Oil prices held firm near the top of their trading ranges, thanks to high compliance among the OPEC countries to curb output. U.S. crude futures traded at $54.33 per barrel, down 0.2 percent on the day.