- Asia markets began the day cautiously after U.S. stocks declined on Friday
- A report that Michael Flynn, the former White House national security advisor, was directed by then-candidate Donald Trump to talk to Russia spooked Wall Street. That report has since been corrected to say Trump made the request when he was already president-elect
- Separately, Senate Republicans were able to narrowly pass a bill to overhaul the U.S. tax system in the early hours of Saturday morning
- Dow Jones industrial average futures rose 212 points to 24,450
Dow Jones industrial average futures, meanwhile, rose 212 points to 24,450 at 9:43 a.m. HK/SIN.
In Australia, the ASX 200 was down 0.18 percent as the heavily-weighted financial subindex fell 0.88 percent. The country’s so-called Big Four banks saw losses in the morning session.
In Hong Kong, the Hang Seng index declined 0.3 percent.
ABC News reported on Friday that Michael Flynn, the former White House national security advisor, would testify that he was directed to make contact with Russians during the presidential campaign in 2016. Flynn pleaded guilty to lying to the FBI about his post-election contacts with Russia’s ambassador to the U.S.
That report hit the markets hard, but ABC later corrected the story to say its source had clarified that Trump gave Flynn the directive “shortly after the election” to discuss strategies for fighting the Islamic State extremist group.
The news “provides a reminder of the cloud hanging over the Trump administration,” Shane Oliver, head of investment strategy and chief economist at AMP Capital, wrote in a weekend note. He added that could cause “bouts of volatility next year and just adds to the likelihood that the GOP will lose control of the House in the November 2018 mid-term elections.”
“However, we remain of the view that it does not change prospects for tax reform (it’s already nearly there) and in fact just highlights the pressure on Congress to get it done,” Oliver noted.
In the early hours of Saturday morning, Senate Republicans narrowly passed a bill to overhaul the U.S. tax system. The GOP still needs to overcome significant disagreements for the House and Senate to craft a joint bill and send it to Trump’s desk. Republicans hope to reach a deal by Christmas.
While the tax bill narrowly passing may have been a “political relief” for the Trump administration, it does not “eradicate fiscal uncertainty,” according to Vishnu Varathan from Mizuho Bank.
“Fact is, a possible U.S. government shutdown looms heading into 8th Dec and, in all likelihood, the backstop to avert a shutdown may be by the skin of the teeth as well,” he wrote in a Monday morning note. “And this could keep long-end yield upside in check if caution trumps exuberance.”
In the currency market, the dollar rose from an overnight low of 92.881 to trade at 93.086 against a basket of currencies at 9:50 a.m. HK/SIN.
Among other currency majors, the Japanese yen fetched 112.67 to the dollar, weakening from an earlier low of 112.39. Despite the relative weakness in the yen, major exporters remained under pressure: Toyotawas down 0.26 percent, Sony reversed early losses to trade up 0.64 percent and Mitsubishi Electric was down 0.54 percent. Nissan shares rose 0.32 percent.
Typically, a weaker yen is a positive for Japanese exporters since it increases their overseas revenue when converted back into local currency.