Slow stimulus progress weighs on Asian bourses

Asian markets struggled Friday to build on the previous day’s rally and a record lead from Wall Street as talks in the US to strike a new stimulus deal slowed to a crawl.

After last month’s surge across equity markets, traders in December have been unable to kick on as vaccine optimism and signs of a breakthrough in Washington, as well as in Brexit negotiations, has been offset by frighteningly high coronavirus infection and death rates around the world.

On Capitol Hill, top-level politicians remain locked in discussions for a rescue package they hope to get passed before the end of the year when crucial support measures for Americans run out.

The two sides, in a stalemate for months, were inching towards a deal after a bipartisan group of lawmakers put together a proposal that appeared attractive to each of them.

“I am heartened by our discussions and our progress. I believe all sides are working in good faith toward our shared goal of getting an outcome,” Republican Senate Majority Leader Mitch McConnell said in a statement, noting the package would include direct payments to people.

“We are going to stay right here until we are finished, even if that means working into or through the weekend.”

President Donald Trump also sounded a note of hope, tweeting that “stimulus talks looking very good”.

But top Democratic senator Chuck Schumer remained cautious, saying an agreement was near but adding that “a few final issues must be hammered out”.

Optimistic outlook

All three major US indices ended at record highs, as long-term economic hope overshadowed data showing an unexpected jump in jobless numbers, which followed a report earlier in the week revealing a drop in retail sales.

But Asia was unable to take the cue, with most markets in the red.

Sydney fell more than 1% on concern about a possible fresh outbreak in the city, while Wellington also dropped more than 1%.

There were losses in Hong Kong, Tokyo, Shanghai, Mumbai and Singapore, while Seoul was marginally up.

London, Paris and Frankfurt all fell at the open.

“With trading rooms’ punch clocks getting sounded for the last time this year, a little bit of profit-taking and de-risking ahead of a weekend that might be filled with ‘what ifs’, is not to be unexpected,” said Stephen Innes at Axi.

“But the risks around Brexit and US stimulus are not binary as the feeling on the Street is it is just a matter of time, so ‘risk’ is unlikely to move too far off-kilter unless the door slams shut on either the US stimulus or Brexit deals.”

Pound slides

The pound dipped but was holding on to its recent gains around 19-month highs as investors remain hopeful that Britain and the EU will eventually thrash out a post-Brexit trade deal despite warnings that the going was tough from both sides.

Prime Minister Boris Johnson has said that there is still a good chance of a no-deal, with negotiators unable to find common ground on access to fishing rights.

After speaking with Johnson, European Commission head Ursula von der Leyen said: “We welcomed substantial progress on many issues, yet big differences remain to be bridged, in particular on fisheries.

“Bridging them will be very challenging.”

And top EU negotiator Michel Barnier warned about the Friday talks: “It’s the moment of truth.

“We have very little time remaining, just a few hours to work through these negotiations… if you want this agreement to enter into force on January 1.”