Pound lifted by Boris Johnson's latest defeat as Asian stocks struggle

The latest defeat on calling an election saw the pound rally more than one per cent against the dollar from as low as US$1.2234 to as much as US$1.2385, its highest level since the end of July.
The latest defeat on calling an election saw the pound rally more than one per cent against the dollar from as low as US$1.2234 to as much as US$1.2385, its highest level since the end of July.PHOTO: AFP

HONG KONG (AFP) - The pound bounced on Tuesday (Sept 10) after Prime Minister Boris Johnson again failed to get MPs to back a snap election, while Asian equities drifted as investors await a key European Central Bank meeting and developments in the China-US trade talks.

Just before Westminster lawmakers broke up for five weeks they inflicted yet another defeat on the new premier, who has been thwarted in his attempts to call an early poll as he looks to win a majority in parliament and push through a no-deal Brexit.

MPs had earlier also voted to demand the government publish confidential documents about Britain's readiness to leave the European Union on October 31 without a divorce deal.

The latest defeat on calling an election saw the pound - which had been slipping through Monday - rally more than one percent against the dollar from as low as US$1.2234 to as much as US$1.2385, its highest level since the end of July. Data showing the British economy faring better than expected also provided support to the sterling.

Mr Johnson insists he will not ask for a delay to the October 31 Brexit date, despite MPs passing a bill that could force him to do so if he fails to reach an agreement with the EU.

Asian equity traders struggled after last week's rally as the ECB prepares for a much-anticipated meeting on Thursday with speculation it will unveil fresh economy-boosting measures including an interest rate cut deeper into negative territory.

"With the two per cent inflation target still a Japanese-style distant memory and growth slowing in Germany, Europe's engine, the ECB had to do something," said Oanda senior market analyst Jeffrey Halley.

 
 

"Whatever comes out on Thursday will test the limits of the effectiveness of monetary policy."

CRUDE BUILDS ON GAINS

There were warnings from some analysts that a disappointing response from the bank could deal a heavy blow to equities.

The ECB announcement comes a week before the Federal Reserve's next meeting, where it is tipped to announce a further reduction in borrowing costs following weak jobs figures and signs of slowing in the economy.

However, other, more upbeat readings have kept traders guessing about the Fed's plans, while reports on consumer prices and retail sales this week will provide more of an idea about the outlook.

In early trade, Hong Kong was down 0.1 per cent, Shanghai slipped 0.4 per cent and Sydney dropped 0.5 per cent, while Taipei, Wellington and Manila were also well down.

However, Tokyo ended the morning slightly higher, while Singapore, Jakarta and Seoul were in positive territory.

There seemed to be little major reaction to Treasury Secretary Steven Mnuchin saying there had been "lots of progress" on trade talks between China and the US.

Dealers are instead waiting for more concrete developments as the two sides prepare for high-level talks in Washington next month.

Regional energy firms were given a leg-up by thanks to gains in oil prices that came after Saudi Arabia's new energy minister, Prince Abdulaziz bin Salman, said output cuts would benefit all exporting nations.

The remarks suggested he would support reductions to address an oversupplied market and sagging prices.