Shares mixed, gold retreats as investors take profits

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By Rae Wee

SINGAPORE (Reuters) -Global shares were mixed on Wednesday and gold pulled back sharply from a blistering rally, as stretched valuations came under scrutiny and investors booked profits.

Geopolitics also loomed large. A planned summit between U.S. President Donald Trump and Russian President Vladimir Putin was put on hold and ambiguity lingered over a potential meeting between Trump and Chinese President Xi Jinping.

Despite Washington and Beijing striking a more conciliatory tone in recent times, Trump added to the uncertainty over the meeting on Tuesday, saying that “maybe it won’t happen”.

In Japan, the Nikkei trimmed early losses on news that new Prime Minister Sanae Takaichi is preparing an economic stimulus package that is likely to exceed last year’s 13.9 trillion yen ($92.19 billion) to help households tackle inflation.

Elsewhere, the sudden dive in gold was the main focus for investors, after prices of the yellow metal sank more than 5% on Tuesday despite no obvious catalyst. It was last nursing losses and trading 0.1% higher at $4,127.22 an ounce. [GOL/]

The precious metal has had a blockbuster run this year, climbing more than 50% as broader geopolitical and economic uncertainty, as well as expectations of U.S. interest rate cuts, spurred demand for the safe-haven asset.

“Gold was massively stretched, massively overbought. There’s been a lot of FOMO (fear of missing out) going into that market,” said Tony Sycamore, a market analyst at IG.

“It’s one of those situations whereby when positions become stretched – and you’d have to say that the Nasdaq is certainly in that boat as well, for some of these other frothy markets, we’re seeing little flash crashes now … We’re just seeing little tremors in markets, and potentially there’s something more significant to come.”

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.61%, while Nasdaq futures rose 0.11% and S&P 500 futures edged up 0.2% after a mixed cash session on Wall Street.

Shares of Netflix sank nearly 6% after the bell as the streaming giant missed Wall Street’s third-quarter earnings targets, while General Motors’ stock surged 15% after the company raised its profit outlook for the year.

EUROSTOXX 50 futures fell 0.3%, while FTSE futures were little changed and DAX futures lost 0.07%.

In China, the CSI300 blue-chip index fell 0.7%. Hong Kong’s Hang Seng Index slid 1.27%.

WAITING ON CENTRAL BANK CUES

In currencies, the yen pared early gains and was last little changed at 151.77 per dollar after the stimulus report.

The package marks Takaichi’s first major economic initiative since the advocate of big fiscal spending took office on Tuesday, reflecting her commitment to what she calls “responsible proactive fiscal policy.”

The Japanese currency had slid nearly 0.8% in the previous session after Takaichi became prime minister, as investors bet her premiership would muddy the outlook for the Bank of Japan’s (BOJ) rate-hike path.

The BOJ meets next week, where market expectations are for the central bank to stand pat on rates.

“The likelihood of a rate hike in October has remained low for some time,” said analysts at Morgan Stanley MUFG Securities in a note.

“Whether there will be a subtle positive change in Governor (Kazuo) Ueda’s comments during the press conference, namely in his evaluation of tariff impacts on the U.S. economy and their effects on Japanese companies, will likely become an important point in assessing the possibility of a rate hike at the next December meeting.”

The U.S. Federal Reserve also announces its rate decision next week, and investors have almost fully priced in a 25-basis-point rate cut.

The dearth of U.S. economic data due to the ongoing government shutdown means that policymakers could be left flying blind at the meeting, a less-than-ideal situation as they remain divided over which risks deserve the most attention.

Trump on Tuesday rebuffed a request by top Democratic lawmakers to meet until the three-week-old U.S. government shutdown ends.

The shutdown has in turn left currencies largely rangebound over the past few sessions due to the lack of fresh catalysts from data releases, though the dollar eased slightly on Wednesday.

The euro was up 0.05% at $1.1607, while sterling edged 0.02% higher to $1.3377.

In commodities, oil prices jumped on fears of Russia sanctions-related supply risk. Brent crude futures were up 1.61% at $62.31 a barrel, while U.S. crude rose 1.71% to $58.22. [O/R]

(Reporting by Rae Wee; Editing by Jacqueline Wong and Kim Coghill)