Asian shares rattled by Trump policy worries after travel ban

A pedestrian walks in front of an electric quotation board flashing stock prices on the Nikkei key index of the Tokyo Stock Exchange on Jan 30, 2017.
A pedestrian walks in front of an electric quotation board flashing stock prices on the Nikkei key index of the Tokyo Stock Exchange on Jan 30, 2017.PHOTO: AFP

TOKYO (REUTERS) - Asian shares slipped on Tuesday (Jan 31) as stringent curbs on travel to the US ordered by President Donald Trump brought home to investors that he is serious about putting his controversial campaign pledges into action.

Global stocks posted their biggest loss in six weeks after Trump signed an executive order on Friday to bar Syrian refugees indefinitely and suspend travel to the United States from seven Muslim-majority countries, sparking widespread protests.

"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 US policymakers and business leaders, including leading hi-tech companies and the chief executives of Goldman Sachs and Ford Motor, and irked many foreign leaders.

"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 0.4 per cent while Japan's Nikkei dropped 1.3 per cent.

On Monday, the US S&P 500 Index fell 0.6 per cent, 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 per cent, its biggest fall in a month and a half.

The mood soured further after 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 per cent on Tuesday and the US 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 5.8 per cent this month while its index of world markets was up 2.6 per cent. They were also higher than their levels before the US elections.

In the currency market, the dollar was broadly weak and fell 0.4 per cent against the yen to 113.32 yen. It was down 3.2 per cent 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. Recent data has suggested the economy is slowly regaining traction.

The euro edged up to US$1.0710, consolidating after its rebound this month from its 14-year low of US$1.0340 set on Jan 3.

In a possible sign of increased anxiety among investors, the safe-have 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 high partly as early elections could be called following a ruling from the country's constitutional court last week.

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.

News that Germany posted a national inflation rate of 1.9 per cent stoked talk of an unwinding of monetary stimulus by the European Central Bank, 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 per cent 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.

Oil prices were little moved after a small fall on Monday after news of another weekly increase in US drilling activity.

US crude futures traded at US$52.62 per barrel, almost unchanged from Monday's close.