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Asia markets higher as jitters ease after Brexit vote spurred $3 trillion global rout

Anthony Wallace | AFP | Getty Images

Asia markets closed higher on Wednesday, following gains across U.S. and Europe on Tuesday as jitters eased after the U.K.'s vote to leave the European Union (EU) spurred a $3 trillion post-Brexit global rout.

Australia's ASX 200 added 39.12 points, or 0.77 percent, to 5,142.40, with the heavily-weighted financials sub-index, which accounts for nearly half of the broader index, gaining 0.63 percent. The country's major banks advanced, with Westpac shares up 0.98 percent.

In Japan, the Nikkei 225 added 243.69 points, or 1.59 percent, to 15,566.83, while across the Korean Strait, the Kospi gained 20.14 points, or 1.04 percent, to 1,956.36. Hong Kong's Hang Seng index was up 0.98 percent as 2:50 p.m. HK/SIN.

Chinese mainland markets also advanced, with the Shanghai composite closing up 19.95 points, or 0.69 percent, at 2,932.51 and the Shenzhen composite higher by 2.96 points, or 0.15 percent, at 1,973.34.

Regional market gains followed a rally on Wall Street. The Dow Jones industrial average closed up 269.48 points, or 1.57 percent, at 17,409.72; the S&P 500 index added 35.55 points, or 1.78 percent, to 2,036.09 and the Nasdaq composite gained 97.42 points, or 2.12 percent, to 4,691.87.

"It was your typical turnaround Tuesday in the financial markets," said Kathy Lien, managing director of foreign exchange at BK Asset Management. "Currencies and equities traded higher across the board at the start of the North American trading session, but as the day progressed, the move lost momentum when investors realized that the fundamental story hasn't changed."

Markets in Asia mostly ignored an attack in Turkey which the White House described as a "heinous terrorist attack." Explosions and gunfire rocked Istanbul's Ataturk Airport on Tuesday, killing dozens and leaving many more wounded, according to various reports.

In the currency market, sterling traded at $1.3348 as of 2:51 p.m. HK/SIN on Wednesday. That's off a 31-year low of $1.3122 touched Monday, but still well below the year-to-date high of $1.5018 it touched in the hours before the referendum results were released.

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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Britain has continued to reel from the ramifications of its shock referendum vote to quit the European Union (EU) last Thursday, though the government has yet to trigger Article 50, which would begin negotiations for an exit. Outgoing U.K. Prime Minister David Cameron said he wanted a "constructive" divorce from the EU on arrival in Brussels on Tuesday for a European summit.

At home, British politicians were largely firefighting the political uncertainty the vote unleashed. The Conservative party faces a question mark over who will replace Cameron, while Labour leader Jeremy Corbyn lost a non-binding no-confidence vote within his own party, according to Reuters.

"The Brexit crisis looks like it may be heading into an awkward period of uncertainty as the cogs in the British and EU bureaucracies slowly begin to whir into action," said Angus Nicholson, a market analyst at spreadbettor IG.

Lien added that the political uncertainty in Britain translated into a long wait in the forex market, and that it did not bode well for currencies.

"Rating agencies are warning of more trouble in the region and companies are freezing hiring and investment," she said, adding the pound could drop as low as $1.3040 in the future.

The Japanese yen traded slightly weaker at 102.25 against the dollar as of 2:52 p.m. HK/SIN, compared with levels near 102.00 on Tuesday afternoon local time. Major export stocks closed higher, with Toyota shares up 2.89 percent, Nissan up 2.28 percent and Honda higher by 1.72 percent.

A stronger yen is a negative for exporters as it reduces their overseas profits when converted into local currency.

Automaker Toyota on Tuesday said it was recalling 482,000 vehicles, which include model year 2010 to 2012 Prius vehicles, due to safety issues.

Electronics maker Sony said it expected its image sensor business will miss its revenue target for the 2017 fiscal year due to weakening global demand for smartphones, reported Reuters. Sony forecast a revenue range of 1-1.05 trillion yen ($9.76-$10.25 billion) for the year starting April 2017, said Reuters.

Investors appeared to have shrugged off the news as Sony shares closed up 4.83 percent.

The dollar remained at the 96 handle against a basket of currencies, trading at 96.009 as of 2:52 p.m. HK/SIN; that compared with levels below 94.00 before the Brexit vote.

Societe Generale's global fixed income strategist Kit Juckes said in a Tuesday note that the dollar's relative strength might not last.

"It's no surprise that periods of risk aversion see the trade-weighted dollar rally even as Treasury yields fall, but unless a recovery in risk sentiment is encouraged by a pretty sharp sell-off in Treasurys, the dollar too, will fall back," he said.

Oil prices advanced on Wednesday, with global benchmark Brent up 0.62 percent to $48.88 a barrel, while U.S. crude futures were up 0.77 percent to $48.22.

Haven gold also advanced, with spot gold up 0.71 percent at $1,321.40 as of 2:57 p.m. HK/SIN, but was off its highs near $1,337 reached following the Brexit vote, when investors flocked to safety.

Government bond yields also came off slightly from their record lows; the 10-year yield on the Japanese government bond was at negative 0.229 on Wednesday afternoon local time, off an earlier session low of negative 0.230.

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