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Japan shares lose ground, as Asia markets close mixed ahead of Brexit vote

Japanese shares lost ground on Wednesday in a mixed Asian trading session, as investors counted down to the upcoming British vote that will decide whether the U.K. remains in the European Union.

The benchmark Nikkei 225 closed down 103.39 points, or 0.64 percent, at 16,065.72, as stocks were under pressure from a relatively stronger yen.

Across the Korean Strait, the Kospi finished up 9.88 points, or 0.5 percent, at 1,992.58. Australia's ASX 200 finished near flat at 5,270.94.

In Hong Kong, the Hang Seng index was up 0.69 percent as of 3:32 p.m. HK/SIN. Chinese mainland markets closed higher, with the Shanghai composite adding 27.21 points, or 0.95 percent, to 2,905.77 and the Shenzhen composite up by 31.67 points, or 1.67 percent, at 1,921.38.

Britons will head to the polls on Thursday, June 23, to determine the future of the U.K. within the 28-member trade bloc. A telephone poll conducted by Survation for IG on Monday showed support for the remain and leave camps were neck-and-neck, compared with a series of weekend polls that suggested momentum tilted in favor of the remain campaign.

Symbol
Name
Price
 
Change
%Change
NIKKEI
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HSI
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ASX 200
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SHANGHAI
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KOSPI
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CNBC 100
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Sally Auld, a fixed income and foreign-exchange strategist at JPMorgan, told CNBC's "Street Signs" that markets seem to be biased toward expectations that the U.K. will remain the EU, with the view bolstered by recent polls.

But she doesn't expect much market action heading into the vote.

"I'm not sure market levels are going to change much in the next 36 hours," Auld said. "It seems to be a widely accepted consensus that probably the best thing to do is to reduce risks, stay on the sidelines, wait and see what happens later this week and then proceed from there."

The British pound traded at $1.4685 as of 3:34 p.m. HK/SIN, up from levels near $1.40 in the previous week.

Federal Reserve Chair Janet Yellen, who began her two-day testimony before Congress, said that a U.K. vote to leave the EU could have significant economic repercussions. In prepared remarks, she also said that a cautious approach to monetary policy remained appropriate and while the pace of improvement in the labor market has slowed, it's important not to overreact to one or two labor reports.

The dollar strengthened in the U.S. session against a basket of currencies, despite Yellen's cautionary remarks; the dollar index traded as high as 94.123 during before trimming some of its gains to trade at 93.838 as of 3:36 p.m. HK/SIN on Wednesday. This was compared with levels around 93.576 on Tuesday afternoon Asia time.

Analysts said the move in the dollar could have been driven by markets positioning for the remain camp to win the referendum in the U.K.

The Japanese yen, which is considered a safe-haven currency, strengthened relatively against the dollar in the afternoon session, with the pair trading at 104.42, compared with levels around 104.85 earlier. On Tuesday afternoon local time, the yen traded near a 22-month high at 103.57 against the greenback.

Major exporters in Japan closed mostly lower, with shares of Toyota shedding 0.53 percent, Nissan off 0.79 percent and Honda down 2.41 percent. Sony shares declined 1.83 percent. A stronger yen is a negative for exporters as it reduces their overseas profits when converted into local currency.

SoftBank shares climbed 2.6 percent, beating the broader index. The Japanese internet and telecommunication giant said its president, Nikesh Arora,had resigned. Masayoshi Son will remain CEO longer than originally planned, while Arora will assume an advisory role at the company, which has a shareholder meeting on Wednesday.

SoftBank also said in a statement on Tuesday that it would exit Finnish game developer Supercell, selling its entire stake to Chinese technology firm Tencent in a deal that values Supercell at about $10.2 billion.

Daniel Milchev | Getty Images

Spot gold traded marginally down at $1,266.25 an ounce in Asian hours; the precious metal, considered a safe-haven asset, has been on a three-day decline after investors returned to riskier assets as concerns of Brexit eased. During U.S. hours, gold futures fell $19.60 to close at $1,272.50 an ounce.

Oil prices closed down overnight, likely due to profit taking following a two-day rally. Global benchmark Brent was down 3 cents at $50.62 a barrel, while the July front-month U.S. crude futures ended down 1 percent at $48.85 before expiring.

During Asian hours Wednesday, Brent traded up 0.79 percent at $51.02 a barrel as of 3:42 p.m. HK/SIN, while the new August front-month U.S. crude futures contract traded up 0.86 percent at $50.28 a barrel.

"News that the Niger Delta Avengers had not agreed to a peace deal with the Nigerian government and a much bigger than expected drawdown in API crude inventories helped see some buying come in just before the close [overnight]," said Angus Nicholson, a market analyst at spreadbettor IG.

Data from the American Petroleum Institute that showed crude inventories fell by 5.2 million barrels for the week ended June 17, Reuters reported. A Reuters poll of analysts expected the drawdown to be only a third of the figure at 1.7 million barrels.

Security concerns appeared to remain on the back burner, following reports that North Korea fired a second missile on Wednesday that appeared to be an intermediate-range Musudan, according to the South Korean military. Reuters said the reclusive country fired the first missile from its east coast just early morning on Wednesday, but it appeared to have failed.

South Korean defense stocks appeared relatively unaffected by the news; Firstec shares were down 0.43 percent, Speco shares were down 2.91 percent and Victek was off by 3.12 percent.

Stateside, the Dow Jones industrial average rose 24.86 points, or 0.14 percent, to 17,829; the S&P 500 index climbed 5.65 points, or 0.27 percent, to 2,088.90 and the Nasdaq composite gained 6.55 points, or 0.14 percent, to 4,843.76.

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