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Gold hits record high as U.S.-China ties worsen, Asia stocks helped by tech

Published 27/07/2020, 01:18 pm
© Reuters.
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* Gold hits record high, dollar falls broadly

* Asia tech shares gain as Intel delays new chips

* U.S.-China tensions keep investors on edge

* Earnings, U.S. stimulus talks in focus

* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Hideyuki Sano

TOKYO, July 27 (Reuters) - Gold hit an all-time high on Monday as tit-for-tat consulate closures in China and the United States rattled investors, boosting the allure of safe haven assets, although sentiment was mixed with tech gains supporting some Asian stocks.

MSCI's ex-Japan Asia-Pacific index .MIAPJ0000PUS rose 1.3% as Taiwan's TSMC 2330.TW , Asia's third-largest company by market capitalisation, rose almost 10%.

The chipmaker's gains boosted other tech stocks in the region and came after rival Intel INTC.O signalled it may give up manufacturing its own components due to delays in new 7 nanometer chip technology. soothing sentiment, Chinese shares eked out gains after big falls late last week, with CSI300 index .CSI300 rising 0.5%.

S&P500 futures ESv1 were last up 0.4% in choppy trade while Japan's Nikkei .N225 fell 0.5%, resuming trade after a long weekend and catching up with falls in global shares late last week.

Global shares had lost steam last week after Washington ordered China's consulate in Houston to close, prompting Beijing to react in kind by closing the U.S. consulate in Chengdu.

U.S. Secretary of State Mike Pompeo took fresh aim at China last week, saying Washington and its allies must use "more creative and assertive ways" to press the Chinese Communist Party to change its ways. President (Donald) Trump used to say China's President Xi Jinping is a great leader. But now Pompeo's wording is becoming so aggressive that markets are starting to worry about further escalation," said Norihiro Fujito, chief investment strategist at Mitsubishi Securities.

Gold rose 1.0% to a record high of $1,920.9 per ounce XAU= , surpassing a peak touched in September 2011, as Sino-U.S. tensions boosted the allure of safe haven assets, especially those not tied to any specific country.

The yellow metal is also helped by aggressive monetary easing adopted by many central banks around the world since the pandemic plunged the global economy into a recession.

Some investors fret such an unprecedented level of money-printing could eventually lead to inflation.

MORE STIMULUS

Hopes of a quick U.S. economic recovery are fading as coronavirus infections showed few signs of slowing. means the economy could capitulate without fresh support from the government, with some of earlier steps such as enhanced jobless benefits due to expire this month.

Investors hope U.S. Congress will agree on a deal before its summer recess but there are some sticking points including the size of stimulus and enhanced unemployment benefits.

U.S. Treasury Secretary Steve Mnuchin said the package will contain extended unemployment benefits with 70% "wage replacement". who control the House of Representatives, want enhanced benefits of $600 per week to be extended and look to much bigger stimulus compared with the Republicans' $1 trillion plan.

Investors are looking to corporate earnings from around the world for hints on the pace of recovery in the global economy.

"It looks like rising coronavirus cases are starting to slow down recovery in many countries," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.

Concerns about the U.S. economic outlook started to weigh on the dollar, reversing its inverse correlation with the economic well-being over the past few months.

The dollar index USD= dropped 0.3% to its lowest level in nearly two years.

The euro gained 0.3% to $1.1693, EUR= hitting a 22-month high of $1.16590 as sentiment on the common currency improved after European leaders reached a deal on a recovery fund in a major step towards more fiscal co-operation.

Against the yen, the dollar slipped 0.5% to 105.605 yen JPY= , a four-month low while the British pound hit a 4 1/2-month high of $1.2832 GBP= .

Oil prices dipped on worries about the worsening Sino-U.S. relations.

Brent futures LCOv1 fell 0.46% to $43.14 per barrel while U.S. crude futures CLc1 lost 0.44% to $41.11. (Editing by Sam Holmes)

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