Asian shares stepped back in cautious early trade on Monday as investors look to see whether US Republicans can hammer a tax reform deal quickly, while the British pound fell on growing doubts over Prime Minister Theresa May’s leadership.

MSCI’s broadest index of Asia–Pacific shares outside Japan dipped 0.15 per cent while Tokyo’s benchmark Nikkei dropped 0.7 per cent.

By Friday's close on Wall Street, the S&P 500 index had snapped an eight-week winning streak as investors took profits after US Senate Republicans had unveiled a new tax plan that differed from the House of Representatives' version.

There are few signs of a compromise yet, with the head of the House of Representatives' tax-writing committee opposing a proposal from Senate Republicans that would hike taxes for some middle class Americans.

“All eyes are on what the Senate and the House of Representatives will do on their tax bills,” said Nobuhiko Kuramochi, chief strategist at Mizuho Securities.

“That there is debate is not surprising at all. Still, it is an uphill moment for markets,” he said.

In the currency market, the dollar also came under pressure from the uncertainty over the fate of the tax cut plans.

The euro traded at $1.1647, down slightly after having made its first weekly gain in four weeks last week.

The dollar fetched 113.58 yen, more than a full yen below its near seven-month high of 114.735 yen touched a week ago.

The British pound came under renewed pressure, slipping 0.5 per cent to $1.3120 after the Times of London reported on Sunday that 40 Tory lawmakers have agreed to sign a letter of no confidence in May.

Elsewhere, bitcoin fell to as low as $5,555 on Sunday, logging a weekly fall of 22 per cent, its biggest since early July as some traders dumped it for a clone called Bitcoin Cash. The digital currency last traded at $5,948, down almost 25 per cent from a record high of $7,888 touched on Wednesday.

Oil prices held firm in early Asian trade, propped up by concerns about the political instability in Saudi Arabia.

The news of a pipeline explosion in Bahrain, which Bahraini authorities said was caused by “terrorist” sabotage, are fanning worries about mounting tensions between Saudi Arabia and its Sunni allies and Shiite Iran.

Brent futures traded at $63.63 per barrel, up 0.2 per cent and not far from their two-year peak of $64.65 set last week. US crude futures were up 0.25 per cent at $56.88.

Related Topics