An investor watches the electronic board at a stock exchange hall on January 21, 2019 in Nanjing, Jiangsu Province of China. Picture: VCG/VCG VIA GETTY IMAGES
An investor watches the electronic board at a stock exchange hall on January 21, 2019 in Nanjing, Jiangsu Province of China. Picture: VCG/VCG VIA GETTY IMAGES

Tokyo — Asian stocks took a breather on Wednesday, with mounting signs of slowing global growth and concerns over a yet-unresolved China-US trade dispute putting the brakes on investor appetite for risk assets.

MSCI’s broadest index of Asia-Pacific shares outside Japan was mostly unchanged, stalling after climbing to a seven-week high on Monday.

The Shanghai Composite Index was last up 0.1%, having flitted in and out of the red.

Australian stocks were a shade lower and Japan’s Nikkei nudged up 0.2%.

On Wall Street, the S&P 500, the Nasdaq and the Dow all posted their biggest one-day percentage drops since January 3 on Tuesday.

Following a sharp drop in December, US shares gained through much of January, supported in part by expectations for a thaw in US-China trade tensions and a more dovish-sounding Federal Reserve. That also prompted global investors to plough into riskier assets.

But putting a dent on sentiment again was a report by Financial Times that the Trump administration had rejected an offer from China for preparatory trade talks this week ahead of high-level negotiations scheduled for next week.

White House economic adviser Larry Kudlow denied the report, helping US equities pare some losses though the fresh concerns about US-China relations kept share prices in check.

Data published over the past 24 hours all pointed to a rough year ahead for the world economy.

US home sales tumbled 6.4% in December, falling short of the weakest forecast, to their lowest in three years. Compared with a year earlier, they were down more than 10% for the first time since 2011.

House price increases slowed sharply, adding to evidence of a further loss of momentum in the housing market.

Canadian factory sales and wholesale trade both slumped more than expected in November, while in Germany a survey by the ZEW research institute showed morale among German investors improved slightly in January, but their assessment of the economy’s current condition deteriorated to a four-year low.

Japan’s exports and imports also fell short of market expectations, with exports posting their biggest fall in more than two years.

As expected the Bank of Japan kept monetary policy easy and trimmed its inflation forecast on Wednesday with the domestic economy facing headwinds.

The latest weak indicators came after the IMF trimmed its global growth forecasts for 2019 and 2020 on Monday, in its second downgrade in three months, just after China reported its 2018 growth slipped to the worst level in nearly three decades.

“Risk asset prices have been essentially supported just by easing of US rate hike expectations,” said Shuji Shirota, head of macroeconomics strategy at HSBC Securities.

“Economic data has been weak and the US government shutdown should be hurting economic sentiment, but even that has been considered as positive for risk assets, on the grounds that they make it difficult for the Fed to raise rates.”

US bond prices rebounded, with the benchmark 10-year yield slipping to 2.741% from Friday’s peak of 2.799%, the highest since December 27, with money market futures pricing out any chance of a Fed rate hike this year.

The euro weakened against the dollar under the weight of recent weakness in the eurozone economy and worries about fallout from Brexit.

The common currency traded at $1.1365, having hit a three-week low of $1.1336 on Tuesday.

The dollar rose 0.35% to ¥109.73, recovering the previous day’s losses.

In commodities, US West Texas Intermediate (WTI) crude futures dipped 0.02% to $52.99 a barrel after shedding 1.9% the previous day.

Reuters