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Asia markets resilient in face of Japan GDP revision, missiles

Thursday 03.30 BST

Overview

Losses from energy stocks offset mild gains in other sectors across Asia-Pacific markets thanks to a sharp dip in oil prices from the previous session, while foreign exchange movements were limited ahead of polls opening for a general election in the UK.

Hot topic

Early gains by Japanese equities quickly disappeared as the country’s Cabinet Office unexpectedly revised first-quarter gross domestic product growth downward to 0.3 per cent quarter on quarter, from an initial reading of 0.6 per cent.

While private consumption and housing investment were both revised downward, much of the headline change came from a downward revision to private inventory investment, and capital expenditure was revised upward more than expected.

That led analysts to maintain a generally positive outlook on Japan’s growth prospects in the back half of 2017. Marcel Thieliant, senior Japan economist at Capital Economics, says “the early indications for Q2 are positive”, with both retail sales and household spending recording strong gains in April.

The Topix was virtually flat in late morning trade, down from an intraday peak up 0.4 per cent. Shares in Toshiba were up as much as 6.5 per cent following reports the company is set to name the buyer of its prized chip unit on June 15.

In Sydney the S&P/ASX 200 index was off 0.2 per cent, pulled lower by a 1.6 per cent dip in energy stocks reeling from Wednesday’s drop in oil prices.

Hong Kong’s Hang Seng was off 0.1 per cent, with gains in other sectors offset by a 1.3 per cent fall in energy stocks. In China the Shanghai Composite was off 0.2 per cent while the Shenzhen Composite was up by the same amount.

Commodities

Oil prices were stabilising in Asian trading after dropping sharply on Wednesday on news that US inventories had risen for the first time in nine weeks.

Brent crude, the global benchmark, was up 0.3 per cent at $48.20 a barrel after a 4.1 per cent drop during the previous session. West Texas Intermediate, the US marker, was up 0.2 per cent at $45.81, having closed 5.1 per cent lower on Wednesday.

Gold was down 0.1 per cent at $1,286.58 per ounce.

Forex

Foreign exchange moves were muted in Asia trade ahead of Thursday’s general election in the UK.

The pound sat virtually unchanged at $1.2958 ahead of Thursday’s election, while the euro was off 0.1 per cent at $0.8678.

The Australian dollar was 0.2 weaker against its US counterpart at $0.7536 after data showed the country’s trade surplus in April tumbled to its lowest level in six months due to a drop in exports.

Japan’s yen was 0.1 per cent weaker at ¥109.89 per dollar, while South Korea’s won shed the same amount to Won1,125.26 per dollar.

Fixed income

Government bonds in the region were losing out with the exception of South Korea, the 10-year sovereign note for which saw yield dip 4 basis points to 2.103 per cent. This comes amid reports that North Korea has conducted fresh missile tests, with South Korea’s Kospi off 0.3 per cent on Thursday morning.

The yield on 10-year Japanese government bonds was up 2bp at 0.052 per cent, while that on the equivalent Australian note rose 3bp to 2.407 per cent.

US Treasuries were less impacted, with yield on the 10-year note up 1bp at 2.178 per cent after rising 3bp on Wednesday.

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