Asian stocks failed to capitalise on recent gains on Tuesday with most major indexes inching backwards as uncertainty over the US mid-term elections put most traders in a cautious mood.
The elections, which will determine who controls the US Congress, saw investors standing off with bets on a gridlocked and divided Congress the favoured flutter.
The outlier was Japan where the Nikkei share average ended at a near eight-week high, as investors scooped up chips and other technology stocks, with overnight Wall Street gains aiding sentiment.
The benchmark Nikkei 225 index gained 1.25%, or 344.47 points to end at 27,872.11. The broader Topix index was up 1.21%, or 23.47 points, to 1,957.56.
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“The market was highly influenced by the performance of US equities overnight,” said Yugo Tsuboi, senior strategist at Daiwa Securities.
“Particularly growth shares were strong. This is because foreign investors, who oversold Japanese shares, bought back those shares. This could be a sigh that they saw a momentum coming back in the Japanese market.”
Technology investor SoftBank Group jumped 4.97% to become the biggest boost for the Nikkei. Chip-related stocks Tokyo Electron and Advantest were up 3.3% and 2.96%, respectively.
MSCI’s gauge of Asia Pacific stocks outside Japan narrowed gains to rise 0.12% at 0517 GMT.
Investors had recently placed bets on hopes that China would adjust its zero-Covid policy and reopen the economy soon but that rally proved unsustainable.
Hong Kong’s Hang Seng index and China’s benchmark CSI300 Index both dropped in the afternoon sessions, wiping out morning gains.
Chinese health officials reiterated their commitment to the zero-Covid policy on Saturday at a press conference.
The policy has weighed on China’s economic activity, with downbeat trade data on Monday providing the latest sign that the world’s second-largest economy is slowing.
The Shanghai Composite Index dipped 0.43%, or 13.32 points, to 3,064.49, while the Shenzhen Composite Index on China’s second exchange dropped 0.40%, or 8.05 points, to 2,019.81.
The Hang Seng Index dropped 0.23%, or 38.60 points, to 16,557.31.
US Mid-Terms, CPI Data
Elsewhere across the region, Australia’s S&P/ASX 200 ended the day 0.36% higher, lifted by financial companies.
Globally, London and New York were set to open lower with FTSE futures and E-mini futures for the S&P 500 index down 0.55% and 0.18%, respectively, after Wall Street’s buoyant Monday close.
“The thing to watch … will be the US mid-terms today and the CPI data tomorrow,” said Redmond Wong, Saxo Markets’ market strategist for Greater China, in a note on Tuesday.
“Markets are expecting the gridlock situation of a divided Congress and moderation in the US CPI. Both are helping the risk-on sentiments.”
Overnight, the Dow Jones Industrial Average rose 1.31%, the S&P 500 gained 0.96% and the Nasdaq Composite advanced 0.85%.
Oil Prices Fall on China Covid
Analysts said the US mid-term elections on Tuesday will impact markets.
“A divided government in Washington is ostensibly bullish for equities,” said Stephen Innes, managing partner of SPI Asset Management in a note.
“Gridlock cross-checks each party’s ‘worst impulses,’ and less activist fiscal policy is conducive to lower market volatility. That could be particularly helpful in 2022 and 2023 to the extent it calms rates volatility, the principal sponsor of this year’s historic cross-asset malaise,” he said.
Oil prices fell as recession concerns and worsening Covid-19 outbreaks in China sparked fears of lower fuel demand, outweighing supply worries.
Brent crude fell 0.32% to $97.61 a barrel by 0526 GMT, while US crude fell 0.38% to $91.44 a barrel.
Spot gold slipped 0.31% to $1,669.4 an ounce as the US dollar gained 0.163%.
Key figures
Tokyo – Nikkei 225 > UP 1.25% at 27,872.11 (close)
Hong Kong – Hang Seng Index < DOWN 0.23% at 16,557.31 (close)
Shanghai – Composite < DOWN 0.43% at 3,064.49 (close)
London – FTSE 100 < DOWN 0.24% at 7,282.74 (0935 GMT)
New York – Dow > UP 1.31% at 32,827.00 (Monday close)
- Reuters with additional editing by Sean O’Meara
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