Asian shares were in mild retreat on Wednesday with investors focused on the US and the outcome of its mid-term elections and key inflation data due out later this week.
Traders across the region are carefully watching the unfolding political drama in the States as Democrats and Republicans battle for control of Congress. The result will be a key driver of economic sentiment over the next couple of years while the latest inflation figure will reveal the US Fed’s next rate hike move.
Japan’s Nikkei closed lower after hitting a near two-month high in the last session, as Nintendo dropped on poor earnings.
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The Nikkei share average accelerated declines in the afternoon session to close down 0.56%, or 155.68 points to end at 27,716.43. The broader Topix index fell 0.41%, or 8.07 points, to 1,949.49.
Videogame maker Nintendo dropped 7.1% after slashing sales projections for its Switch console by 10%.
Energy shares also tumbled amid a retreat in crude prices, ranking worst among Nikkei sectors, with a 2.67% drop.
“Ahead of [the] CPI, investors have shifted to a wait-and-see posture,” Takuro Hayashi, head of the investment research centre at IwaiCosmo Securities, said.
MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.33% higher but Hong Kong stocks closed lower, dragged down by weak Chinese economic data and with traders playing a wait-and-see game watching the results from the elections in the US.
Producer prices in China fell for the first time since December 2020, underscoring faltering domestic demand amid Covid-19 curbs.
China stocks soared last week on hopes that authorities in the country would relax their zero-Covid policy but rising cases have tempered expectations.
“Despite all the positive talk about slowly unwinding zero-Covid and experimenting with bigger events, it looks as if more lockdowns might be on their way,” ING regional head of research Robert Carnell said.
The Hang Seng Index dropped 1.2%, or 198.79 points, to 16,358.52.
The Shanghai Composite Index dipped 0.53%, or 16.33 points, to 3,048.17, while the Shenzhen Composite Index on China’s second exchange dropped 0.41%, or 8.30 points, to 2,011.51.
US Congress Gridlock Prediction
Elsewhere across the region, Australian stocks gained 0.6% while Indian stocks dropped with Mumbai’s signature Nifty 50 index down 0.25%, or 45.80 points, to close at 18,157.00.
Globally, European stock futures indicated stocks were set to decline, with the Eurostoxx 50 futures down 0.4%, German DAX futures 0.33% lower and FTSE futures down 0.34%.
Results of the US mid-term elections will decide whether the Democrats lose or retain congressional control halfway through President Joe Biden’s term.
“Some of the key races are quite close. It’s going to take some time to see who wins … we already have a scenario of gridlock because the Republicans are going to take the house,” said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.
“The market can accept gridlock. It means that many of the measures from the administration will be thwarted by the opposing part.”
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Saxo Markets strategists said a split Congress could end up sparking an equities rally and putting pressure on the dollar.
Meanwhile, cryptocurrencies were jittery after a sharp drawdown when worries about the stability of exchange FTX turned to a rush of withdrawals and ultimately a bailout deal from bigger rival Binance.
Bitcoin, the biggest cryptocurrency by market value, fell 2%, a day after sliding 10%.
In the currency market, the US dollar has been under downward pressure from bets on the Federal Reserve easing back on interest rate rises. The dollar last traded at $1.0071 per euro and bought 145.66 yen.
Oil prices slid on Wednesday as industry data showed US crude stockpiles rose more than expected, as well as on China Covid-19 worries.
US crude fell 0.36% to $88.59 per barrel and Brent was at $95.16, down 0.21% on the day.
Key figures
Tokyo – Nikkei 225 < DOWN 0.6% at 27,716.43 (close)
Hong Kong – Hang Seng Index < DOWN 1.2% at 16,358.52 (close)
Shanghai – Composite < DOWN 0.53% at 3,048.17 (close)
London – FTSE 100 < DOWN 0.43% at 7,274.47 (0935 GMT)
New York – Dow > UP 1% at 33,160.83 (Tuesday close)
- Reuters with additional editing by Sean O’Meara
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