Asian shares retreated from a record peak on Monday after news reports of the United States preparing to impose sanctions on some Chinese officials highlighted geopolitical tensions, while oil prices fell due to surging virus cases.
In a signal that markets elsewhere would start weaker, Eurostoxx 50 futures were 0.4 percent down, futures for Germany’s DAX eased 0.3 percent while those of London’s FTSE were flat. E-Mini futures for the US’s S&P 500 benchmark share index slipped 0.2 percent.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.1 percent following four straight sessions of gains. The index hit a record high of 644.3 points early on Monday.
It is up about 16 percent so far this year, the best performance since a 33 percent jump in 2017.
China’s blue-chip index dropped 0.8 percent, largely ignoring strong export data, while Hong Kong’s Hang Seng was down 1.7 percent.
Japan’s Nikkei declined 0.46 percent from its highest level in nearly 30 years, while Australian shares were up 0.6 percent.
US Treasury bonds were steady, with the benchmark yield near its highest in nine months at slightly less than 1 percent, Bloomberg reported.
The sell-off began after the Reuters news agency cited sources as saying that the US was preparing sanctions against at least a dozen Chinese officials over their alleged role in Beijing’s disqualification of elected opposition legislators in Hong Kong.
The move comes as President Donald Trump’s administration keeps up the pressure on Beijing in his final weeks in office.
“One thing that the market has been concerned about is that on his [way] out of office Trump would look for some retribution on China. So this news speaks to that fear,” said Kyle Rodda, market strategist at IG Markets in Melbourne.
“At the end of the day, the market knows he only has six weeks left. The broader focus is still on vaccine roll-outs and US fiscal stimulus.”
Asian markets had started the day higher on hopes of a rapid global economic recovery as coronavirus vaccines get rolled out, starting this week in the United Kingdom.
US authorities will also discuss the programme this week before the expected first round of vaccinations this month.
Hopes that the vaccines will help curb the pandemic, which has so far killed more than 1.5 million people globally, sent shares soaring in recent weeks.
On Wall Street, stock indexes reached fresh all-time highs on Friday with the Dow rising 0.8 percent, the S&P 500 gaining 0.9 percent and the Nasdaq adding 0.7 percent.
“The vaccine will break the link between mobility and infection rate, allowing for the strongest global GDP growth in more than two decades,” JP Morgan analysts wrote in a note, forecasting global growth of 4.7 percent in 2021.
Still, expectations of a US stimulus aid package gathered pace after weak payrolls data last week, following months of deadlocked negotiations.
The US economy added the fewest workers in six months in November, with non-farm payrolls increasing by 245,000 jobs last month, much lower than expectations for a 469,000 increase.
A bipartisan group of Democrats and Republicans proposed a compromise $0.9 trillion package that leaders on both sides appear open to agreeing to.
In currencies, investor focus is on a last-ditch attempt by the UK and the European Union to strike a post-Brexit trade deal this week, with probably just days left for negotiators to avert a chaotic parting of ways at the end of the year.
If there is no deal, a five-year Brexit divorce will end messily just as the UK and its former EU partners grapple with the severe economic cost of the COVID-19 pandemic.
The pound was a shade weaker at $1.3419 while the European single currency was up 0.1 percent at $1.2133, not too far from an April 2018 high of $1.2177.
The risk-sensitive Australian dollar was up 0.1 percent at $0.7433.
That left the US dollar down 0.1 percent at 90.702 against a basket of major currencies, after hitting a 2-and-a-half-year low last week.
In commodities, oil prices slipped from their highest levels since March as a continued surge in coronavirus cases globally forced a series of renewed lockdowns, including strict new measures in Southern California.
US crude was off 24 cents at $46.02 per barrel and Brent was down 26 cents at $48.99. Brent has lost about a quarter of its value so far this year.
Spot gold, which hit a record high of $2,072.49 an ounce, was last at $1,838.9, still up a hefty 21 percent this year.