TOKYO: Asian stocks opened the week on the back foot Monday, with investors still in gloomy mood after several days of market turbulence sparked by trade rows and a spat over the US central bank.
Japanese equities led the way lower, with the benchmark Nikkei 225 shedding almost 2%, not helped by reports that Prime Minister Shinzo Abe would later Monday announce a hike in sales tax.
“We have never seen a share price rise in the past after an announcement of a sales tax hike,” noted Kyoko Amemiya, senior market strategist at SBI Securities.
Chinese stocks, which were the worst hit in last week’s global rout, also opened lower, but only by 0.04% and the broader Shenzhen Composite Index was in the green.
Markets in Hong Kong, Australia and South Korea also drifted lower.
“We can’t say the shock is over,” said Masayuki Kubota, chief strategist at Rakuten Securities.
Last week saw a broad-based sell-off in global equities, prompted by fears of higher US interest rates, continued worries over US-China trade and attacks by President Donald Trump on the Federal Reserve, which he called “crazy”.
On Friday, the bulls attempted a fight-back but found it hard going in another seesaw session. Early European gains fizzled and the Dow Jones closed up 1.2% following late buying but it also dipped into the red for part of the session.
This week, traders are expected to focus on a raft of economic data and dozens of company results.
Turning to commodities, oil prices continued to soar as traders fretted over US relations with its ally and world’s top oil producer Saudi Arabia.
Trump has warned of “severe punishment” if it is revealed that journalist Jamal Khashoggi was murdered inside the Kingdom’s consulate in Istanbul but Riyadh hit back immediately, saying it would retaliate.
Both Brent Crude and WTI oil prices surged, which was also a factor in declining stocks, analysts said.
On the foreign exchange markets, the pound was hit by further uncertainty over Brexit talks after last-ditch negotiations between London and Brussels failed to make headway on the vexed question of the Northern Irish border.
There were also reports that Prime Minister Theresa May could be the victim of a cabinet rebellion and that her coalition partner, the Northern Irish Democratic Unionist Party (DUP), could vote down her budget, possibly triggering another election.
Sterling sank in Asian trade at the beginning of a make-and-break week for the British currency.
“There remains a huge amount to play for this week and sterling will likely be significantly higher or lower than it is now by the end of the week,” said Ray Attrill, head of FX Strategy at National Australia Bank.