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Asian shares slip as investors lock in gains from 2019 rally

SHANGHAI: Asian shares were mostly lower on Tuesday, in their last trading day of the decade as investors locked in profits after a buoyant year of gains, driven in recent weeks by hopes of an imminent US-China trade deal.

European equity markets were expected to follow suit after losses on Wall Street Monday. FTSE futures were down 0.37 per cent at 7,508.

But US stock futures showed some optimism ahead of Wall Street’s final session of the year, with S&P 500 e-minis up 0.12 per cent at 3,227.3.

At about 0620 GMT, MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.46 per cent lower, set for its weakest performance since Dec. 4. For the month, the index is still up 5.6 per cent.

The index has gained nearly 16 per cent this year, a sharp turnaround from a 16.2 per cent drop last year but lagging a 23.8 per cent year-to-date gain in MSCI’s global share index. The Asian index gained 33.5 per cent in 2017, about the same as its total rise over the previous decade.

Australian shares ended their best year since 2009, 1.78 per cent lower, and Hong Kong’s Hang Seng finished down 0.46 per cent in a half-day session.

“We are seeing some profit-taking into year-end,” said Ryan Felsman, senior economist at CommSec in Sydney, adding that progress on resolving the 17-month-long US-China trade war remained a positive factor for investors into the new year.

The White House’s trade adviser on Monday said the US-China Phase 1 trade deal would likely be signed in the next week, but said confirmation would come from President Donald Trump or the US Trade Representative.

“We think that the global growth situation is improving, we’re seeing better industrial profits in China … green shoots in the manufacturing sector on the back of an improvement in the trade situation is a key catalyst going forward,” he said.

While easing trade concerns and lifting uncertainty around Britain’s exit from the European Union have helped reduce some near-term market uncertainty, investors remain worried about a recession, seen as inevitable in the new decade.

Positive Chinese manufacturing data, which showed factory activity expanding for a second straight month in December, nudged China’s blue-chip CSI300 index 0.3 per cent higher, extending the more-than-33 per cent gain seen this year.

China’s gains built on Monday’s rally, which was driven by a combination of strong retail sales growth and hopes that a new benchmark for floating-rate loans could lower borrowing costs.

Markets in Japan and South Korea were closed for a holiday.

The falls in Asia came after profit taking pushed the Dow Jones Industrial Average down 0.64 per cent to 28,462.14, the S&P 500 0.58 per cent lower to 3,221.29 and the Nasdaq Composite off 0.67 per cent to 8,945.99.

US Treasury futures inched lower, reflecting an implied yield of 1.81 per cent. That followed a rise in benchmark US Treasury yields on Monday that pushed the US two-year, 10-year yield curve to its steepest in 14 months.

The dollar continued to weaken against the yen for a third straight session, dropping 0.20 per cent to 108.65 and hitting its lowest level since Dec. 12. The euro strengthened 0.06 per cent to buy $1.1204.

The dollar index, which tracks the greenback against a basket of six major rivals, was 0.05 per cent lower at 96.692.

US crude dipped 0.13 per cent to $61.60 a barrel and Brent crude edged down to $66.65 per barrel. The global benchmark remains up 23.8 per cent for the year.

Gold continued its rally on a weakening dollar. On the spot market, the precious metal was changing hands at $1,523.14 per ounce, up 0.53 per cent. Gold prices have risen 18.7 per cent so far this year.

Source: Economic Times