Asia stocks fall despite Mnuchin's weekend triage

Asian stocks fell in early trade Monday despite a weekend call by Treasury Secretary Steven Mnuchin to top US banking executives aimed at stemming market panic which saw Wall Street experience its worst week in a decade.

The Dow and the Nasdaq ended Friday with their biggest weekly drop since the start of the global financial crisis as investors took fright over a government shutdown in Washington, President Donald Trump's public feuding with the Federal Reserve and the US-China trade war returning to the forefront.

With Tokyo closed for a public holiday on Monday, Hong Kong and Shanghai set the tone with both exchanges seeing losses in early trading. Sydney was up slightly while Seoul was down.

 

Mnuchin spent much of the weekend in damage control mode after multiple media outlets reported that Trump had privately asked cabinet members if he has the authority to fire Fed Chairman Jerome Powell.

Last week, the central bank hiked rates, infuriating Trump who has ignored the traditional respect for the Fed's independence, calling it "crazy", "out of control" and a greater economic threat than China.

Mnuchin denied the reports of Trump seeking Powell's scalp, tweeting on Saturday that the president told him: "I never suggested firing Chairman Jay Powell, nor do I believe I have the right to do so."

The following day, Mnuchin announced he had called senior executives from six of the largest American banks to discuss the market turmoil and received assurances.

"The banks all confirmed ample liquidity is available for lending to consumer and business markets," the Treasury said in a statement attached to a tweet from Mnuchin announcing the calls.

"We continue to see strong economic growth in the US economy with robust activity from consumers and business," Mnuchin was quoted in the statement as saying, adding that he would convene a call with the President's Working Group on financial markets later Monday.

Analysts expressed both surprise and alarm at Mnuchin's Sunday statement, saying it might do the opposite of calming current jitters.

"Nothing says don't panic like saying 'I'm calling the plunge protection team tomorrow'," Michael O'Rourke, JonesTrading's chief market strategist, told Bloomberg News.

"I honestly think that's the type of event that's going to startle markets and create more panic and fear when it's meant to create confidence."

Last week's turmoil in Washington -- which included a government shutdown that appears likely to last until at least Thursday and the abrupt resignation of Defence Secretary Jim Mattis -- has spooked markets worldwide.

Japan's Nikkei hit a fresh 15-month low on Friday with its fourth consecutive day of losses, while European bourses were flat or rising slightly.

Oil inched higher in Asian trade after crude-producing nations said they expect prices will arrest their recent slide and rebalance early next year, when a deal on new production cuts takes effect.

However, analysts said prospects for a global economic slowdown in the coming year -- which would weaken crude demand -- and rising US shale output are dampening sentiment and limiting any rebound from the current 15-month lows.

Prices have plunged by around 40 per cent from four-year peaks reached in early October on concerns about oversupply and weaker demand.

In foreign exchange markets, the yen rose 0.2 per cent to 111.02 per dollar, the euro was up 0.1 per cent at USD 1.1379 and the pound was at USD 1.2658, a 0.1 per cent rise.