Tokyo - Asian shares slipped on Tuesday as
stringent curbs on travel to the United States ordered by
President Donald Trump brought home to investors that he is
serious about carrying out his controversial campaign pledges.
Global stocks posted their biggest loss in six weeks on
Monday after Trump signed an executive order to bar Syrian
refugees indefinitely and suspend travel to the United States
from seven Muslim-majority countries, sparking widespread
protests.
European bourse are expected to remain fragile after big
losses on Monday, with spread-betters seeing opening losses of
as much as 0.1 percent in major indexes, including Britain's
FTSE, Germany's DAX and France's CAC.
"Investors are becoming worried as it appears as if he was
setting fire to geopolitical risks that already exist," said
Yoshinori Shigemi, global market strategist at JPMorgan Asset
Management.
Trump's move drew criticism from some U.S. policymakers, and
business leaders, with technology companies, which depend on
talent from around the world, planning to discuss a legal
challenge.
"His stance is really inward-looking, making investors
nervous about his 'moderateness'," said Masahiro Ichikawa,
senior strategist at Sumitomo Mitsui Asset Management.
MSCI's broadest index of Asia-Pacific shares outside Japan
fell 0.5 percent while Japan's Nikkei
dropped 1.7 percent, its biggest fall in almost three months.
On Monday, the U.S. S&P 500 Index fell 0.6 percent,
its biggest fall in a month, though it remained well above
levels seen before the Nov. 8 presidential election.
MSCI's gauge of the world's 46 stock markets
shed 0.6 percent, its largest loss in a month and a half.
The mood soured further when Trump fired the federal
government's top lawyer after she took the extraordinarily rare
step of defying the White House.
US stock futures shed 0.3 percent on Tuesday and
the dollar extended losses against the yen.
Still, most share prices were up on the month, supported by
signs of accelerating momentum in the global economy and hopes
of large fiscal stimulus from Trump.
MSCI's ex-Japan Asian shares index was up 5.7 percent this
month while its index of world markets was up 2.5 percent. They
were also higher than their levels before the U.S. elections.
In the currency market, the dollar was broadly weak and fell
0.3 percent against the yen to 113.49 yen. It was down
3.1 percent so far this month, after three straight months of
sizable gains.
The Japanese currency showed no reaction after the Bank of
Japan kept its policy on hold, as expected. A string of recent
data has suggested the economy is slowly regaining traction.
The euro edged up to $1.0710, consolidating after its
rebound this month from its 14-year low of $1.0340 set on January 3.
In a possible sign of increased anxiety among investors, the
safe-haven Swiss franc strengthened to a seven-month high of
1.0637 franc per euro on Monday.
Worries are also growing about a political shift to populist
leaders in Europe.
French bond yields rose to the highest level
since September 2015, on rising uncertainty over the
Presidential election later this year.
Conservative leader Francois Fillon, seen as the
front-runner, is now battling to contain a scandal over
allegedly unlawful payments to his wife while the Socialists on
Sunday picked a hard-left candidate, possibly helping popular
far-right leader Marine Le Pen.
Italian debt yields climbed to 1 1/2-year highs
partly as early elections could be called following a ruling
from the country's constitutional court last week.
Italian assets have also been hit by worries over its
banking sector after UniCredit, the country's biggest
bank, revealed on Monday it expects to book a net loss of around
11.8 billion euros ($12.6 billion) for 2016 and fall short of
European Central Bank capital requirements.
By contrast, the yield on German debt fell on
Monday even as data showed inflation in Germany hit a 3 1/2-year
high in January.
Inflation
News that Germany posted a national inflation rate of 1.9
percent stoked talk of an unwinding of monetary stimulus by the
ECB, even though the inflation outcome was below expectations.
Elevated uncertainty about Trump's policies, including a
lack of detail so far on his plans for tax cuts and fiscal
spending, offset optimism on the US economy.
Data on Monday showed US consumer spending accelerated in
December while inflation showed some signs of picking up last
month.
The core PCE price index, the Federal Reserve's preferred
inflation measure, rose 1.7 percent on a year-on-year basis
after a similar gain in November.
"We've seen a jump in U.S. economic sentiment after Trump's
victory. But the improvement in hard economic data remains
moderate," said Haruka Kazama, senior economist at Mizuho
Research Institute.
"And if Trump takes more steps to limit permits for
immigrants, that would surely boost inflation as the US is now
near a full employment," she added.
The Federal Reserve, which will start its two-day policy
meeting on Tuesday, is widely expected to keep interest rates
unchanged as it awaits greater clarity on Trump's economic
policies.
Oil prices dipped as rising US drilling activity offset
efforts by OPEC and other producers to cut output in a move to
prop up the market.
Brent crude futures, the international benchmark for
oil prices, were trading at $55.14 per barrel, down 0.2 percent
from Monday's settlement price.