Month: September 2017

Asia markets cautious following Korean Peninsula tensions

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Indexes in Asia were cautious on Tuesday after stocks stumbled and investors turned to safe haven assets in the previous session on the back of North Korea’s recent nuclear test.

The Nikkei 225 was off 0.15 percent in early trade.

South Korea’s benchmark Kospi index made cautious gains, climbing 0.1 percent after closing lower by more than 1 percent in the previous session.

Down Under, the S&P/ASX 200 declined 0.58 percent, driven by steep falls in the energy and utilities sub-indexes. Major banks were also lower across the board, with the heavily-weighted financials sub-index falling 0.62 percent.

Tensions on the Korean Peninsula remained in focus even as markets recovered slightly. The U.S. on Monday called for the “strongest possible” sanctions to be imposed on North Korea a day after the North said it had tested a hydrogen bomb. President Donald Trump also spoke to South Korean President Moon Jae-in on the phone, during which he gave “conceptual approval” for South Korea to purchase billions of dollars in weapons from the US., Reuters said.

South Korea also said on Monday that the North was planning to launch an intercontinental ballistic missile, according to Yonhap. Meanwhile, South Korea would proceed with the rolling out an anti-missile system that had drawn China’s ire, according to Reuters.

Gold edged down after climbing to its strongest levels in around 11 months. Spot gold stood at $1,333.86 an ounce at 8:01 a.m. HK/SIN after climbing as high as $1,336.79 on Monday

Meanwhile, the yen — often regarded as a safe haven currency — was largely flat, trading at 109.76 yen to the dollar.

The Korean won clawed back some losses to trade at 1,128.47 won to the dollar after going as low as 1,132.61 won to the dollar overnight.

Stocks in Europe and Asia had closed lower on Monday, with the Kospi closing 1.19 percent down and the Nikkei 225 falling 0.93 percent. The pan-European Stoxx 600 experienced more moderate losses, erasing 0.52 percent by the market close.

Despite the move to safety, analysts said market reaction on Monday was relatively muted.

“Risk off sentiment has hardly become evident. Moves back to safe haven or risk off currencies, [such as] the Japanese yen and the Swiss franc, have been very much at the margin,” National Australia Bank Director of Economics David de Garis said in a note.

On the energy front, U.S. crude added 0.23 percent to trade at $47.40 a barrel as demand picked up and U.S. refineries started to resume operations. Brent crude slid 0.17 percent to trade at $52.25 a barrel.

Gasoline futures fell 3.51 percent to $1.6866 a gallon, close to levels seen before Hurricane Harvey hit.

In individual stocks, Japanese automakers were mixed despite posting solid August sales figures in China. Toyota sales in the country rose 13.2 percent in August compared to a year ago, according to Nikkei Asian Review. Honda sales picked up 20.6 percent while Mazda sales climbed 8.4 percent, Nikkei said. In reaction, Toyota shares were up 0.42 percent, Honda edged up 0.43 percent and Mazda was off 0.03 percent.

Meanwhile, South Korean retail names trended lower. Shares of Lotte Shopping and Lotte Himart were down 0.41 percent and 0.73 percent, respectively. The moves came following news that Lotte Duty Free was weighing a decision to withdraw from Incheon International Airport in South Korea. South Korean retailers have had a difficult year owing in part to China’s opposition to the deployment of an anti-missile system in South Korea.

Ahead, investors are expected to focus on China Caixin services PMI due later in the morning after the official services reading came in at its lowest level since May 2016. Both Caixin and official manufacturing PMI for August beat expectations.

Here’s the economic calendar for Tuesday (all times in HK/SIN):

9:30 a.m.: Australia second-quarter current account
9:45 a.m.: China Caixin August services PMI
12:30 p.m.: Reserve Bank of Australia decision
4:00 p.m.: Taiwan August CPI
U.S. markets will re-open on Tuesday for trade after taking a break on Monday for Labor Day.

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North Korea’s nuclear test rattles Asian markets, driving gold, yen higher

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Safe haven demand drove up gold and the yen while equities in Asia were pressured by elevated tensions on the Korean Peninsula early on Monday after North Korea said it tested a hydrogen bomb over the weekend.

Japan’s Nikkei 225 declined 0.44 percent in early trade.

Across the Korean Strait, the Kospi fell 0.88 percent. Blue chips across sectors sold off: Samsung Electronics tumbled 1.25 percent and Hyundai Motor was down 1.4 percent.

South Korean markets have retraced losses fairly quickly in the past following North Korean saber-rattling, but the benchmark index has taken slightly longer to recover after the latest provocations.

Down Under, the S&P/ASX 200 slid 0.32 percent, with declines seen across most sectors. The heavily-weighted financials sub-index was down 0.51 percent, but gold miners rose.

Malaysia and Vietnam markets are closed for public holidays.

Meanwhile, gold prices and the yen were supported by safe haven demand as markets in the region reacted to North Korea.

Against the Japanese currency, the dollar slid almost 0.4 percent to fetch 109.81 yen at 8:11 a.m. HK/SIN, after falling as low as 109.29 yen earlier in the session. That compared to Friday’s close above the 110 handle.

The Swiss franc, also regarded as a safe haven currency during times of uncertainty, rose to trade at 0.9610 francs to the dollar from the 0.965 handle seen last Friday. The currency strengthened as high as 0.9585 francs to the dollar earlier in the session.

Meanwhile, spot gold surged to trade as high as USD 1,336.79 an ounce, up from levels around USD 1,324 seen in the last session. The yellow metal last traded at USD 1,336.35.

“After a risk positive overnight session on Friday, news on Sunday that North Korea successfully tested a more advanced nuclear weapon has this morning triggered a bid for safe haven currencies (Japanese yen and Swiss franc) while [the] Australian dollar and New Zealand dollar are a little bit softer,” said National Australia Bank Currency Strategist Rodrigo Catril in a Monday note.

North Korea claimed on Sunday that it had conducted a test of a hydrogen bomb meant to be carried by a long-range missile. The test — which the North called a “perfect success” — was estimated to have an explosive yield of up to 100 kilotons, news agency Yonhap reported a South Korean lawmaker as saying.

President Donald Trump called North Korea’s latest test “hostile and dangerous.” When asked about the possibility of a US military attack in response to the North’s latest actions, Trump told a reporter, “We’ll see.”

Trump also suggested on Twitter that the US was considering “stopping all trade with any country doing business with North Korea” as a potential response. The move, if implemented, would likely affect China — North Korea’s most important trading partner.

The Sunday test came on the back of heightened geopolitical tensions in the region. The North had launched a missile that flew over Japan just a few days prior.

Markets also continued to digest weaker-than-expected US employment data released on Friday. US nonfarm payrolls for August showed 156,000 jobs were created, below the 180,000 forecast by economist in a Reuters poll.

Despite the miss, equities in the US closed higher on Friday, with the Dow Jones industrial average rising 0.18 percent, or 39.46 points, to close at 21,987.56.

In corporate news, Malaysia’s Petroliam Nasional Berhad, or Petronas, said on Saturday it was not interested in acquiring a majority stake in Daewoo Engineering & Construction, Reuters reported. South Korean media had reported that Petronas was interested in the deal on Friday. Daewoo shares were down 1.75 percent in early trade.

Other market movers in the session included surging Korean defense stocks. Shares of military systems maker Victek outperformed, jumping 18.56 percent in early trade. Gains in other defense players were more moderate: Hanwha Techwin was up 0.26 percent and Korea Aerospace rose 0.22 percent.

On the energy front, Brent crude futures declined 0.63 percent to trade at USD 52.42 a barrel. US West Texas Intermediate was flat at USD 47.29. Meanwhile, US gasoline futures extended losses made on Friday, falling 2.41 percent to trade at USD 1.7058 a gallon.

Meanwhile, the dollar index, which tracks the greenback against a basket of six major currencies, stood at 92.650 at 8:28 a.m. HK/SIN.

The economic calendar for Monday is fairly light, with the only notable data release being Indonesia August CPI due at 12:00 p.m. HK/SIN.

US markets will be closed Monday for Labor Day.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow