Asian investors tread carefully with US tax reform in the balance

Hong Kong (AFP) –


Most Asian markets saw tentative gains on Friday but investors moved nervously as Donald Trump's much-hyped tax-cut plans hung in the balance after a plan to push them through hit unexpected hurdles.

The Dow surged to new records on Wall Street as several key Republicans backed the controversial reforms, which the president says will fire up the US economy, fuelling hopes they could reach Trump's desk for signing by year's end.

However, a new projection showing the measure would add $1 trillion to the federal deficit -- complicating Trump's argument the cuts would pay for themselves -- saw three senators -- Bob Corker, Jeff Flake and Ron Johnson -- withdraw their support until changes were made.

Republicans hold a narrow 52-48 Senate majority and three defectors would kill the bill.

Global equities have rallied this year on the back of hopes for Trump's market-friendly promises of tax cuts, infrastructure spending and deregulation, but analysts warn of a sharp sell-off if the plans fall flat.

By the break Tokyo was flat, giving up earlier gains that had seen the Nikkei reclaim the quarter-century highs touched last month.

Hong Kong rose 0.5 percent, having fallen for four days, while Shanghai gained 0.2 percent.

Sydney and Seoul each added 0.3 percent, Singapore rose 0.7 percent and Wellington edged up 0.2 percent but Taipei and Manila slipped.

Technology firms through Asia saw some tepid gains after Thursday's sharp sell-off.

- 'Rexit' reports -

Energy firms rose but gains were muted after OPEC and Russia agreed to extend a cap on oil output by a further nine months, until the end of next year.

While the limit provided support for oil prices, the news had already been baked in, while there are also worries that they will not be continued into 2019.

"Basically, the markets did not spike because most of what was announced was expected and factored into the prices," Sukrit Vijayakar, founder of energy consultancy Trifecta Consultants, told AFP.

"The new elements, if any, were that Libya and Nigeria would cap production, but since it did not involve any production cuts, that would not provide the market any fillip," he added.

"The bearish factor, very carefully worded, is that the group would review in June 2018 whether it is necessary to loosen the cuts because the market is too tight. This takes care of the Russian desire to move early on production expansion."

On currency markets the dollar held steady against its major rivals as dealers track events in Washington but there are worries about further upheaval in the Trump administration with speculation he could replace Secretary of State Rex Tillerson.

"Questions continue to swirl around the Trump administration as 'Rexit' reports, rumours and innuendos emanating from Foggy Bottom (State Department headquarters) brings the administration's credibility into question once again," said Stephen Innes, head of Asia-Pacific trading at OANDA.

The pound held its gains on hopes British and European Union officials are close to a divorce settlement deal over Brexit.

Volatility in the Bitcoin virtual currency continued as it fell to as low as $9,089 at one point, just two days after hurtling to a record above $11,000.

- Key figures around 0310 GMT -

Tokyo - Nikkei 225: FLAT at 22,724.11 (break)

Hong Kong - Hang Seng: UP 0.5 percent at 29,335.36

Shanghai - Composite: UP 0.2 percent at 3,323.57

Euro/dollar: UP at $1.1910 from $1.1900 at 2150 GMT

Pound/dollar: DOWN at $1.3533 from $1.3536

Dollar/yen: DOWN at 112.50 yen from 112.57 yen

Oil - West Texas Intermediate: UP three cents at $57.43 per barrel

Oil - Brent North Sea: UP 15 cents at $62.78

New York - DOW: UP 1.4 percent at 24,272.35 (close)

London - FTSE 100: DOWN 0.9 percent at 7,326.67 (close)