World Economy

Asia Shares on the Defensive

MSCI’s broadest index of Asia-Pacific shares outside Japan was almost flat.MSCI’s broadest index of Asia-Pacific shares outside Japan was almost flat.

Market sentiment was a little shaky on Friday with Asian shares on the defensive after US President Donald Trump scrapped a key summit with North Korea, though investors’ fears were calmed by Pyongyang’s measured response to the cancellation.

North Korean Vice Foreign Minister Kim Kye Gwan said Pyongyang still hoped for a “Trump formula” to resolve the standoff over its nuclear weapons program, noting that North Korea was open to resolving issues with the United States, Reuters reported.

MSCI’s broadest index of Asia-Pacific shares outside Japan was almost flat, while South Korea’s Kospi pared much of its earlier loss of 0.9%. Japan’s Nikkei was up 0.1%. On Wall Street, the S&P 500 had ended 0.2% lower on Thursday, though it clawed back a large part of its earlier loss of 0.95%.

Even before the reaction from Pyongyang, there were no immediate signs of widespread investor panic with Wall Street’s volatility index, seen as a gauge of investors’ fears, ending at a four-month low on Thursday.

Analysts said that the level of calm reflected investors’ becoming accustomed to Trump’s dramatic negotiation style, in which he makes drastic calls before making compromises, and are increasingly seeing North Korea’s Kim Jong-un adopt a similar approach.

Adding to political jitters was Trump’s raising the specter of high US tariffs on imported cars, reigniting fears of a trade war, although some investors see this as a Trump tactic to get better deals from big car-exporting countries.

The 10-year US Treasuries yield dipped to as low as 2.955% on Thursday as bond prices rose before it ticked back to 2.992% in Asia on Friday. It is still off a seven-year high of 3.128% hit a week ago.

“For many Asian markets, rises in US bond yields would have been a bigger problem (than cancellation of the meeting between Trump and Kim),” said Yukino Yamada, senior strategist at Daiwa Securities.

Oil prices slipped, partly on speculation reduced supplies from Venezuela and Iran could prompt the Organization of the Petroleum Exporting Countries to wind down output cuts in place since the start of 2017.

Russia hinted it may gradually increase output, after having withheld supplies in concert with OPEC since 2017.

Brent crude futures stood at $78.68 a barrel, down 0.15% on Friday after a 1.27% loss the previous day. US West Texas Intermediate crude futures were little changed at $70.66 per barrel. They lost 1.57% on Thursday.

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