Asia report: Markets mixed as investors hold their breath over stimulus

Markets in Asia finished in a mixed state on Wednesday, as investors digested a number of developments in the ongoing Covid-19 pandemic.

In Japan, the Nikkei 225 was up 0.31% at 23,639.46, as the yen strengthened 0.55% against the dollar to last trade at JPY 104.92.

Automation specialist Fanuc was up 1.75%, while among the benchmark’s other major components, fashion firm Fast Retailing lost 1.45%, and technology conglomerate SoftBank Group slid 0.71%.

Airlines were on the front foot in Japan as investors cheered cost-cutting measures from major Hong Kong carrier Cathay Pacific, with ANA up 1.8% and Japan Airlines rising 2.9%.

The broader Topix index was 0.73% firmer by the end of trading in Tokyo, closing at 1,637.60.

On the mainland, the Shanghai Composite slipped 0.09% to 3,325.02, and the smaller, technology-heavy Shenzhen Composite was off 1.1% at 2,254.23.

South Korea’s Kospi was 0.53% firmer at 2,370.86, while the Hang Seng Index in Hong Kong rose 0.75% to 24,754.42.

The blue-chip technology stocks were mixed in Seoul, with Samsung Electronics finishing flat, while chipmaker SK Hynix lost 1.64%.

Hong Kong-based airline Cathay Pacific was ahead .27% after it announced a restructuring plan that would see 5,900 staff laid off.

Its short-haul regional arm, Cathay Dragon, would also stop flying with immediate effect, the airline confirmed.

Korean Air Lines was also in the green on the back of the news, rising 2.69% by the close.

In fresh economic data out of South Korea, exports in the first 20 days of October dropped by 5.8% year-on-year, after rising by 3.6% in September.

“Bloomberg reports no consensus, but the report was a lot weaker than we expected, even though the September increase was due a reversal,” said Pantheon Macroeconomics senior Asia economist Miguel Chanco.

“This year’s Chuseok autumn holiday fell mostly in the first week of this month, hitting both the 10-day and 20-day reports hard.

“In the first 10 days of the month, shipments tanked by almost 30% year-on-year.

“Last year’s break was in mid-September, accounting for the very favourable base effect which flattered last month’s results.”

Chanco said the new data pointed to an 8.2% year-on-year contraction in exports for the whole month of October, following September’s full-month 7.6% spike.

“Not surprisingly, trends at the margin in October were squeezed, even after adjusting for seasonality.

“On our adjustment, 20-day exports plunged by 9.7% m/m, destroying the 9.1% jump in September, when some front-loading ahead of the break probably gave additional impetus.”

Shipments to China were particularly weak, Chanco noted, while those to the US suffered a milder month-on-month correction.

“Overall, though, the recovery in exports appears to have remained broadly on track.

“Stripping out calendar effects, daily average exports increased by 5.9% year-on-year in the first 20 days of October, albeit with the help of base effects, marking a sharp improvement from the 9.8% plunge during the same period in September.”

The coronavirus crisis still remained firmly at the top of the agenda, with renewed hope over the prospects of a stimulus package emerging stateside overnight.

Progress between Democrats and the Trump administration was reportedly made on Tuesday, although White House chief of staff Mark Meadows did caveat that by reporting that some significant differences remained between the two sides.

“The gap between the two sides has certainly narrowed in terms of the headline number with the Republicans upping their offer to $1.9trn, however splits still remain on state and local aid as well as liability protections for businesses,” said CMC Markets chief market analyst Michael Hewson.

“This would suggest that last night’s optimism over the framework for a deal was somewhat misplaced, as once again Pelosi and Mnuchin agreed to pick up for further talks later this afternoon.”

Hewson said that meant the Tuesday deadline was thrown out, but noted that Nancy Pelosi did say she was now hopeful of a deal this week.

“It seems that the deadline for a deal remains very much a moving target, and for now that appears to be supporting risk, with Asia markets broadly positive.”

There was also positive progress on the vaccine front, with Moderna chief executive officer Stephane Bancel saying they were expecting interim results from its Covid-19 trial in November.

Bancel suggested to the Wall Street Journal that the US Food and Drug Administration could give a vaccine an emergency use authorisation before the end of the year.

Oil prices were lower at the end of the Asian day, with Brent crude last down 1.51% at $42.51 per barrel, and West Texas Intermediate slipping 1.46% to $41.09.

In Australia, the S&P/ASX 200 managed gains of 0.12% to 6,191.80, as flag carrier Qantas Airways eked out a rise of 0.2% to join the region’s airline rally.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 lost 0.24% to 12,432.61, although cinema technology company Vista Group rose 2.55%, after it reported that revenue was making its way back to pre-pandemic levels.

Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.4% at AUD 1.4132, and the Kiwi advancing 0.58% to NZD 1.5111.