Aug 29, 2019

Asia I Asia Markets Closing Report: Asia stocks mixed as investors watch US Treasury yields

Eustance Huang

Stocks in major Asian markets were mixed on Thursday as investors continued to watch the yield curve in U.S. Treasurys, which inverted further overnight.
Mainland Chinese shares dipped on the day, with the Shanghai composite slipping 0.1% to about 2,890.92 and the Shenzhen component down 0.17% to 9,398.47. The Shenzhen composite was 0.172% lower at around 1,591.08. Hong Kong’s Hang Seng index, on the other hand, was up 0.28% as of its final hour of trading.
The Chinese yuan also briefly weakened to a level not seen in more than 11-and-a-half years.
The Nikkei 225 in Japan close slightly lower at 20,460.93, while the Topix finished its trading day largely flat at 1,490.17. Over in South Korea, the Kospi closed 0.4% lower at 1,933.41. Australia’s S&P/ASX 200 rose 0.1% to end its trading day at 6,507.40.
Overall, the MSCI Asia ex-Japan index rose 0.08%.
Investors continued to monitor the yields in U.S. Treasurys. The 30-year bond yield fell to a new record low of 1.907% on Wednesday before seeing a recovery. It was last at 1.9607%.
The closely-watched yield spread between the 10-year Treasury note and 2-year note also widened further on Wednesday, extending losses from the previous session where it touched its lowest level since 2007. The phenomenon, also known as a yield curve inversion, has historically preceded periods of recession.
The yields on the 10-year Treasury note and 2-year note were last at 1.4844% and 1.5119%, respectively.
“I think it’s always easy to say it’s different this time. The reality is and it’s tough to sugarcoat it, when the yield curve inverts, it’s usually a very powerful predictor of ... at best a slowdown and usually ... it’s a recession,” said Omar Slim, senior vice president of fixed income at PineBridge Investments, Singapore.
“The short-end with the 10-year is ... where you see most of the inversion and that’s usually because the market is expecting a slowdown,” Slim told CNBC’s “Street Signs” on Thursday. He added that this was driven by fears of recession both in the U.S. as well as elsewhere globally.
Markets continued to remain on edge as investors await developments on the U.S.-China trade front, with the tariff war between the two economic powerhouses recently escalating and further dampening sentiment and raising concerns over the global economic outlook.

Samsung shares tumble

In corporate news, shares of companies under South Korean conglomerate Samsung dropped on Thursday after the country’s Supreme Court overturned part of an appeals court ruling in the bribery case involving the group’s de facto chief Jay. Y Lee.
Samsung Electronics saw its stock drop 1.7%, while Samsung C&T plunged 4.05% and Samsung Biologics plummeted 4.89%.
The latest ruling raises questions over Lee’s ability to lead Samsung Electronics as it faces falling profitability issues and challenges surrounding a Japanese ban on the export of crucial materials for South Korea’s technology sector. He was freed from detention in February 2018 after his original sentence of a five year imprisonment was halved and suspended for four years.

Asia-Pacific Market Indexes Chart

NIKKEINikkei 225 IndexNIKKEI20460.93-18.49-0.09
HSIHang Seng IndexHSI25703.5088.020.34
ASX 200S&P/ASX 200ASX 2006507.406.800.10
KOSPIKOSPI IndexKOSPI1933.41-7.68-0.40
CNBC 100CNBC 100 ASIA IDXCNBC 1007600.51-13.22-0.17

Chinese yuan recovers

The onshore Chinese yuan briefly weakened past 7.17 against the greenback for the first time in more than 11-and-a-half years on Thursday, Reuters reported, before making a recovery in the afternoon of Asian trading hours. It last traded at 7.1572.
The People’s Bank of China had set the official midpoint reference for the yuan at 7.0858 on Thursday morning. Meanwhile, offshore trading of the yuan was last at 7.1611 per dollar.
“While fears of China actively engaging in a currency war were abetted by the US Treasury’s declaration of China as a ‘currency manipulator,’ the recent weakening of the (yuan) looks more like a controlled easing of China monetary policy to offset downward pressure on growth,” analysts at J.P. Morgan wrote in a note.
The U.S. dollar index, which tracks the greenback against a basket of its peers, was last at 98.235 following lows below 98.0 seen earlier in the week.
The Japanese yen traded at 106.08 against the dollar after seeing lows around 106.2 yesterday. The Australian dollar changed hands at $0.6735, off highs above $0.676 touched earlier in the trading week.
Oil prices were mixed in the afternoon of Asian trading hours, with international benchmark Brent crude futures down 0.48% at $60.20 per barrel, while U.S. crude futures rose slightly to $55.81 per barrel.
— Reuters and CNBC’s Fred Imbert contributed to this report

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