Asian Shares Down on Renewed Brexit Fears
October 06 2016 - 11:40PM
Dow Jones News
Market worries sent Asian equities broadly lower early Friday,
as increasingly heated discussions over the U.K.'s departure from
the European Union saw the pound plunging against the U.S.
dollar.
The Nikkei Stock Average was down 0.2%, Australia's S&P/ASX
200 fell 0.3%, Hong Kong's Hang Seng Index was down 0.4% and
Korea's Kospi slipped 0.3%. Markets in China are closed for the
Golden Week holiday.
"The Brexit situation is one of the risk focuses the markets
have," said Ric Spooner, chief market analyst at CMC Markets. "The
question is how is it going to play out."
The pound fell as much as 6.3% against the dollar to $1.1819 in
early Asian trading before recovering, according to Thomson Reuters
data. The declines have since narrowed to around 1.9%.
The selloff began with comments by French President Franç ois
Hollande, who said the EU should negotiate toughly with the U.K. to
avoid a fallout on member states. Britain wanted to leave the bloc
"but doesn't want to pay," which was "not possible," Mr. Hollande
said in comments cited by Sky News.
"I initially doubted what I saw on my screen," said Kenji
Yoshii, a foreign exchange strategist at Mizuho Securities in
Tokyo, as the pound tumbled in early Asia trading.
The wave of selling Friday follows a rough patch for the pound.
Earlier this week, Prime Minister Theresa May set a date to begin
leaving the EU. So far in October, the pound was down 4.1% against
the dollar.
In Hong Kong, stocks with significant exposure to the U.K.
declined markedly, reacting to the pound's precipitous drop.
Banking giant HSBC was off 1.0%, while Standard Chartered Bank fell
1.8%. HSBC's drop was responsible for about one-quarter of the Hang
Seng Index's declines in the morning session.
Also, Cheung Kong Infrastructure, which has many utility
investments in the U.K., declined 1.4%, while its parent company,
conglomerate CK Hutchison, fell 0.7%.
Still, some analysts said they don't expect much impact of the
pound's plunge on wider markets, at least in the short term.
"No other currency moved except sterling at that time, so I
think the snowball effect to other markets like Asian equities is
close to zero," said Tareck Horchani, deputy head of sales trading
for Asia Pacific at Saxo Capital Markets.
Meanwhile, U.S. initial jobless claims, a proxy for layoffs,
decreased by 5,000 to a seasonally adjusted 249,000 in the week
ended Oct. 1, the Labor Department said Thursday. That was the
smallest figure since mid-April, when claims hit an almost 43-year
low.
The data supported expectations of an interest-rate increase by
the Federal Reserve at its meeting in December. Rises in interest
rates typically see an outflow of capital from emerging markets.
The market will be closely watching nonfarm payrolls data, out
Friday, for further clues as to the timeline for a rate
increase.
Elsewhere, banks in Japan fell after Bank of Japan Governor
Haruhiko Kuroda cautioned Thursday that European nations should
react to the problems affecting their banking system in a timely
manner, juxtaposing the current situation with Japan's banking
crisis in the 1990s.
The central banker said the banking crisis in Japan grew more
serious and extended as the government took a long time to respond,
with the injection of public funds. "It is true that had adverse
effect on the macro economy," Mr. Kuroda told reporters in
Washington, D.C.
The Topix banking subindex snapped a four-day winning streak and
was recently down 0.8%. Among individual banks, Sumitomo Mitsui
Financial Group fell 1%, Mitsubishi UFJ Financial Group was down
0.6% and Mizuho Financial Group slipped 0.5%.
Hiroyuki Kachi, Saumya Vaishampayan, Kenan Machado, Yuka Hayashi
and Willa Plank contributed to this article.
Write to Ese Erheriene at ese.erheriene@wsj.com
(END) Dow Jones Newswires
October 06, 2016 23:25 ET (03:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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