Stocks Raise Slightly After Week-Long Slump

Asian stocks increased modestly on Tuesday, gaining from a firmer footing following a week of heavy losses, although easing factory-gate inflation in China and increasing tensions between Saudi Arabia and the West have limited gains.

Spreadbetters expected European stocks to open slightly higher, with Britain’s FTSE finishing up 0.05 percent, Germany’s DAX swelling 0.25 percent, and France’s CAC perking up 0.15 percent.

MSCI’s broadest index of Asia-Pacific shares excluding Japan moved up 0.25 percent, creeping away from a 19-month trough touched on Thursday.

Japan’s Nikkei recovered 0.8 percent after a decline of almost 2 percent the previous day.

Meanwhile, the disappearance in Turkey earlier this month of a Saudi journalist critical of Riyadh has provoked an international outrage against the oil-rich kingdom, which has rattled its financial markets.

US President Donald Trump has sent Secretary of State Mike Pompeo to Saudi Arabia as the case threatened to dent the relationship between the strategic allies.

“The focus of the markets has turned to the Middle East due to the Saudi incident. And with US stocks still struggling other equity markets will have a difficult time bouncing convincingly,” stated Masahiro Ichikawa, who is a senior strategist at Sumitomo Mitsui Asset Management in Tokyo.

“The United States has been the epicenter of the recent market tumult, with Wall Street shares being hit by higher Treasury yields. US shares will have to find their feet first,” he added.

Saudi Arabia’s riyal currency retreated overnight to 3.7525 to the dollar, which is its weakest in two years, before inching back to 3.7513.

Wall Street shares were dragged down on Monday by a slump in technology shares amid looming concerns over high US Treasury bond yields.

The Dow has shed 4.5 percent in this month, moving away from record peaks, as long term Treasury yields rocketed to their highest level since 2011. Higher yields are seen eroding the allure of equities.

Hong Kong’s Hang Seng index was higher 0.1 percent and the Shanghai Composite Index gained 0.15 percent.

Data on Tuesday showed that China’s factory-gate inflation cooled for a third month in a row in September amid ebbing domestic demand, indicating a much higher pressure on the world’s second biggest economy as it remains locked in an intensifying trade war with the United States.

In the midst of the tentative ebb in risk aversion in the broader markets, perceived safe havens such as the Japanese yen and Swiss franc handed back some of their most recent gains.

The dollar was up 0.3 percent at 112.10 yen following a slide to a one-month low of 111.625 overnight.

Against the dollar, the Swiss currency weakened 0.2 percent to 0.9886 franc after gaining 0.5 percent during the previous session.

The euro was a trifle weaker at $1.1569 after increasing 0.2 percent during the previous day.

Sterling was at $1.3142, having recovered from a one-week low of $1.3080 plumbed on Monday amid a stalemate over the post-Brexit status of Britain’s land border with Ireland.

Currency market focus was on the US Treasury’s semiannual currency report due later in the day, as investors waited to see Washington’s view on China after media reports last week that the department has not labeled Beijing a currency manipulator.

“It is clear that China does not meet the criteria of currency manipulator based on the current assessment, as the country’s current account surplus as a percent of GDP has fallen below 3 percent,” said strategists at OCBC Bank.

China’s yuan was a touch lower at 6.925 per dollar in onshore trading.

In commodities, tension between the United States, the world’s top oil consumer, and Saudi Arabia, which is one of the biggest producers, pushed up crude prices on concerns about supply.

Signs that Iranian oil exports have fallen ahead of US sanctions taking effect next month have also lifted crude.

Brent crude futures increased 0.45 percent to $81.13 per barrel, extending gains from Monday.

Safe haven gold was at $1,226.35 an ounce, a throwing distance of an almost three-month high of $1,233.26 plumbed on Monday.

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