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Asian stocks are in a sea of red ahead of Christmas

FXstreet.com Friday, 21 December 2018
· *Asian investors are selling risk on Fed outlook and turmoil in Washington.*
· *Nikkei hits lowest since September 2017.*

Asian equities are in a sea of red for the second day.

As of writing, Japan's Nikkei is trading at 20,067 - the lowest level since Sept. 15, 2017. Risk aversion and the resulting strength in JPY has dealt a double blow to Japanese equities. Other regional heavyweights like S&P/ASX 200, Hang Seng, and Shanghai Composite are reporting at least a 1 percent drop. Also, South Korea's Kospi is down 0.3 percent.

The US Fed hiked rates by 25 basis points on Wednesday and spooked investors by signaling that rates could be hiked two times in 2019. Markets were convinced that the Fed would pause rate hikes next year.

Further, turmoil in Washington is adding to the bearish tone around the risk assets. Notably, US stocks fell into the red yesterday after US President Donald Trump refused to sign legislation to fund the US government unless he got money for a border wall, thus risking a partial federal shutdown on Saturday.

The news did hit the wires earlier today that the House Republicans have approved $5 billion for Trump's wall. Democrats reportedly have the Senate votes to block any bill that includes funding for Trump’s wall and Trump isn't open to compromise. So, the probability of shutdown is still high and that is likely keeping the Asian stocks under pressure.

The FX markets are also witnessing a classic risk-off action.  The dollar has taken a beating - down more than 1 percent against the safe-haven Japanese yen in the last 24 hours.  Meanwhile, gold jumped to over five-month highs above $1260 yesterday and was last seen trading at $1,266.
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Credit: Wochit Business - Published < > Embed
News video: Asian Stocks Slip Amid Government Shutdown Fears

▶ Asian Stocks Slip Amid Government Shutdown Fears 00:33

SYDNEY (Reuters) - Global stocks were sailing into Christmas on a sea of red on Friday, as the threat of a U.S. government shutdown and of further hikes in U.S. borrowing costs inflamed investor unease over the economic outlook. A man walks past in front of a stock quotation board showing the price...

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