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Jan 17, 2017

Asian Markets at Close Report on January 17, 2017: Nikkei Falls as Key U.K. Speech Looms; China Shares Volatile

marketwatch.com
 
Kenan Machado 
 
Asian shares were broadly lower Tuesday, ahead of a crucial speech by U.K. Prime Minister Theresa May, who is set to announce a clean break from the European Union.

The Nikkei Stock Average NIK, -1.48%  was down 0.8%, while Australia’s S&P/ASX 200 XJO, -0.85%  was off 0.9% and Singapore’s Straits Times Index was off 0.2%.
May will double down on comments she made last week, saying that Britain doesn’t want “partial membership” in the EU, according to excerpts of a speech released by her office on Monday.
The comments reinforce expectations that she will prioritize border and immigration control over access to the common European market. That sent the British pound down over 1% against the U.S. dollar late Monday, though it recovered slightly in early Asian trade Tuesday.
Markets would have been resilient to May’s speech on its own, but the fact that the speech comes so close to Donald Trump ‘s inauguration as U.S. president makes investors anxious, said Gary Huxtable, a client adviser at Atlantic Pacific Securities.
“Investors are sitting on pretty healthy profits and any sign of anxiety is an incentive to sell,” he said.
In China, the nation’s key domestic stock markets were down further on Tuesday, after shares suffered their biggest daily drop in over a month on Monday. This was weighed by a sharp correction in the last trading hour amid concerns of fast-rising supply of new shares, with technology stocks igniting the selloff.
“Sentiment was affected by the slew of (initial public offerings) with a majority of them concentrated on the technology board with valuations not being supportive,” said Caroline Yu Maurer, who heads Greater China equities at BNP Paribas Investment Partners. Chinese markets remain dominated by retail investors who trade mostly on sentiment, she said.
At the midday break, the Shenzhen Composite Index 399106, +1.17%  was down 0.7%, following Monday’s 3.6% decline, while the Shanghai Composite Index SHCOMP, +0.17%   was off 0.5%, adding to Monday’s 0.3% loss. The Shanghai Composite was off as much as 1% after the lunch break.
Meanwhile, rising political uncertainties, such as upcoming elections in France and Germany, as well as Trump’s unpredictability, weighed on stocks across the region, particularly in the banking sector.
Among banking shares in Japan, Sumitomo Mitsui 8316, -1.36%  fell 1.2%, Mizuho 8411, -1.61%  dropped 1.5%, and Mitsubishi UFJ 8306, -1.54%  declined 1.4%, tracking declines in the stocks of their European counterparts over Brexit concerns.
The yen USDJPY, -0.85%  was last up 0.5% against the U.S. dollar, making exports from the country more expensive. That added to the gloom over automobile stocks there with Honda, Mazda and Toyota all in the red. On Sunday, Trump had criticized German car makers, exhorting them to manufacture in the U.S. in order to sell cars there.
Read: German minister to Trump after tax threat: ‘The U.S. needs to build better cars’
Meanwhile, Brent crude LCOH7, +1.07%  , the international oil benchmark, was down 0.3% at $55.78 a barrel ahead of crucial data this week that could show whether the cuts announced by the Organization of the Petroleum Exporting Countries have worked.
Saudi Minister of Energy and Industry Khalid Al-Falih Monday said these cuts may not be needed beyond the middle of the year.
“Falih’s comments are consistent with the Saudi message throughout 2016 that the market was moving back into balance. That in itself is bullish for prices going forward,” said Greg McKenna, chief market strategist at Axitrader.
Shares of Chinese oil giants traded in Hong Kong were broadly higher, with oil refiner Sinopec 600688, +0.60%  rising 2.2%, offshore oil producer Cnooc   0883, +0.31%  rising 0.4%, while PetroChina 601857, +0.35%  added 1.3%.