Japan gains and China slides in mixed Asia markets


Tuesday 07.00 GMT

What you need to know

  • US midterm elections leave investors in cautious mood
  • Outcome of vote could create legislative deadlock in Washington
  • Japan stocks gain while Hong Kong equities drop
  • Sterling touches 2-week high
  • Oil prices retreat

Hot topic

Sentiment on global stock markets remained cautious, with the US midterm elections adding to the list of political risk factors faced by investors.

Major stock indices remained some distance off their October lows, with futures trade pointing to modest gains in Europe and on Wall Street after a more mixed showing across Asia.

The dollar held its ground, with the index tracking the world’s reserve currency up by 4.6 per cent for 2018, a gain of 0.1 per cent on the session. The 10-year US Treasury yield was flat at 3.201 per cent.

The voting in the US will determine whether or not Democrats will take control of the House of Representatives — a development that could make it more difficult for President Donald Trump to enact legislation.

According to European futures trade, Frankfurt’s Xetra Dax will rise 0.4 per cent with London’s FTSE 100 set to gain 0.1 per cent.

In Japan, the Topix index was up 1.4 per cent, with financials rising 1.5 per cent and energy stocks gaining 2.5 per cent.

But Hong Kong’s Hang Seng index dropped 0.2 per cent. The consumer cyclicals sector shed 2.8 per cent, while technology stocks fell 1.4 per cent with Apple suppliers were among the worst performers on the index. Sunny Optical and AAC Technologies were down 7 per cent and 6.7 per cent, respectively, following a Nikkei Asian Review report that Apple had told suppliers to hold off on extra production lines for the new iPhone XR amid disappointing demand.

Taiwan-listed Apple assemblers Pegatron and Foxconn, also known as Hon Hai Precision Industry, fell 4.8 per cent and 3.4 per cent, respectively, following the report.

The Hang Seng China Enterprises index of major Chinese companies listed in Hong Kong was down 0.1 per cent, and mainland Chinese bourses were also lower with the CSI 300 index of Shanghai- and Shenzhen-listed companies down 1.5 per cent.

The declines came in spite of comments from Wang Qishan, China’s vice-president, that Beijing was “ready to have a discussion with the US on issues of mutual concern and work for a solution on trade acceptable to both sides”.

On Monday in New York the S&P 500 ended 0.6 per cent higher and the Dow Jones Industrial Average gained 0.8 per cent, while the tech-heavy Nasdaq Composite lost 0.4 per cent. Early US futures calls pointed to a gain of 0.2 per cent for the S&P, with the Nasdaq set to regain 0.1 per cent.

Forex and fixed income

The pound was 0.1 per cent stronger, though off a two-week high of $1.3067, following a report from The Times that the EU was preparing to back a compromise on the issue of the Irish border.The euro was unmoved at $1.1401 and the Japanese yen weakened slightly to ¥113.32 per dollar.

The Australian dollar strengthened slightly to $0.7214 after the country’s central bank opted to keep cash rate unchanged at 1.5 per cent, as expected, and raised its forecast for economic growth in 2018 and 2019.

Commodities

Oil prices retreated, with Brent crude down 0.4 per cent at $72.88 a barrel and West Texas Intermediate falling 0.2 per cent to $62.95 a barrel.

The US formally imposed sanctions on Iranian crude exports on Monday but granted temporary waivers to eight countries including China and Japan, allowing them to continue to purchase oil from Tehran.

Gold was 0.2 per cent lower at $1,229 an ounce.

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