Asian shares slip as Brussels attacks make investors cautious

Asian shares slipped in subdued trading on Wednesday as investors pulled back on positions ahead of the long Easter weekend, opting for caution following the suspected Islamic State suicide bomb attacks in Brussels.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.5 percent, its first decline in six days. Japan’s Nikkei .N225 surrendered earlier gains to close down 0.3 percent.

Chinese shares .SSEC .CSI300 were little changed, while Hong Kong’s Hang Seng retreated 0.6 percent.

European markets were poised for a similar start, with financial spreadbetters expecting Britain’s FTSE 100 .FTSE to open down 0.2 percent, Germany’s DAX .GDAXI to be 0.1 percent lower, and France’s CAC .FCHI to start the day little changed.

Financial markets took in their stride news of the attacks in Brussels that killed at least 30 people.

Risk appetite quickly recovered to help MSCI’s emerging market index .MSCIEF rise 0.2 percent to four-month high early in the Asian day, but it had eased back 0.5 percent towards the end.

“Generally, the impact of terror attacks has become less and less dramatic after 9/11,” said Berard Aw, market strategist at online brokerage IG in Singapore. “But investors may be squaring positions ahead of the long weekend, especially in light of the Brussels attacks.”

Sentiment at some of the biggest companies across Asia brightened in the first quarter of 2016, rising from a four-year low registered three months prior, as executives bet on economic improvement in China, a Thomson Reuters/INSEAD survey showed.

Koichi Yoshikawa, executive director of financial markets at Standard Chartered Bank in Tokyo, said the recent Group of 20 meeting and annual gathering of China’s parliament had restored some faith in the outlook for the global economy, as investors were reassured that policymakers would take appropriate monetary and fiscal policy measures to bolster their economies.

“That is reassuring markets and investors’ funds that had fled to the U.S. markets are returning to high-yielding currencies and emerging markets,” he said.

In the currency market, the euro EUR= last stood at $1.1201, having slipped to $1.11885 on Tuesday.

Sterling slipped to $1.4194 GBP= on Wednesday after falling more than 1 percent to one-week lows against the dollar following news of the attack on Brussels, on fears it could persuade more people to vote in favor of Britain leaving the European Union in a June referendum.

The Chinese yuan eased against the dollar, with the spot market CNY=CFXS last standing at 6.4939 per dollar after opening at 6.4847. That compares with the midpoint rate CNY=SAEC of 6.4936 set by the People’s Bank of China prior to market open.

The safe haven yen last stood little changed at 112.32 to the dollar JPY=, down 0.7 percent so far this week.

The dollar, which edged down in early trade as Asian investors reacted to news of the Brussels attacks, was helped by a rise in U.S. bond yields after Chicago’s Federal Reserve president, seen as a policy dove, struck a bullish tone on the U.S. economy.

Chicago Fed President Charles Evans said he expects two more rate increases this year, based on the current economic outlook.

The dollar index .DXY, which tracks the U.S. currency against six major rivals, advanced 0.1 percent to 95.764.

The 10-year U.S. Treasuries yield rose to 1.954 percent US10YT=RR, its highest in a week, compared to 1.871 percent at the end of last week, and edging near last week’s seven-week high of 2.002 percent. It was last at 1.9316 percent.

U.S. interest rate futures <0#FF:> are also fully pricing in a chance of more than one rate hike by the end of year.

Oil prices slipped from their highs after U.S. industry data showing bigger than expected builds in domestic inventory, but prices maintained a firm tone, supported by general recovery in risk appetite.

Brent futures LCOc1 slid 1 percent to $41.37 per barrel, but remained near the three-month high of $42.54 set on Friday.

U.S. crude CLc1 also declined 1.1 percent to $41.00.

The American Petroleum Institute (API), an industry group, said after futures market settlement on Tuesday that U.S. crude stockpiles rose almost 9 million barrels last week to reach a record high of nearly 532 million.

Source: Reuters