Cautious trade in Asia ahead of UK election, Comey testimony; oil recovers slightly

  • Asian markets closed mostly higher ahead of the U.K. election and testimony from former FBI Director James Comey expected later in the day
  • Oil prices recovered slightly after slumping 5 percent in the overnight session
  • Euro and pound sterling held steady during the Asian trading session

Asian markets closed mostly higher on Thursday ahead of key risk events later in the day, with apparent land-to-ship missiles fired by North Korea in the morning added to the mix.

The Kospi gained 0.15 percent or 3.43 points to finish the session at 2,363.57. Down Under, the S&P/ASX 200 reversed earlier losses to close higher by 0.17 percent or 9.428 points at 5,676.6

Japan's benchmark Nikkei 225 index closed down by 0.38 percent or 75.36 points at 19,909.26.

Stocks in greater China were in the green. The Hang Seng Index was up by 0.32 percent at 3:02 p.m. HK/SIN. The Shanghai Composite finished higher by 0.34 percent or 10.6082 points at 3,150.9331 and the Shenzhen Composite climbed 0.126 percent or 2.3239 points to close at 1,852.8570.

This was after China reported better than expected trade data for the month of May. Exports were up by 8.7 percent and imports gained 14.8 percent in dollar terms, compared to the 7 percent and 8.5 percent increases projected, Reuters reported.

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Ahead, markets are expected to focus on the U.K. election. A recent poll indicated the lead of Prime Minister Theresa May's Conservative Party has fallen to just 5 percentage points. Other opinion polls suggest the Conservatives would be able to maintain their parliamentary majority.

Stateside, former FBI Director James Comey is due to testify before the Senate Intelligence Committee over whether U.S. President Donald Trump requested him to "drop" a probe into Michael Flynn, the ex-national security advisor.

"(M)arkets have been on edge all week awaiting the coming events. While the results of the various events could matter for individual markets, for broader markets it could once again be a case of "as you were." Nonetheless, one can't ignore the risks," ANZ Head of FX Research Daniel Been said in a morning note.

Meanwhile, short-seller Carson Block announced his decision to short Hong Kong-listed furniture maker Man Wah Holdings yesterday. Man Wah shares fell 15 percent yesterday and remained suspended from trade.

Commenting on the short, Citi analysts Mark Li and Eric Lau said in a note that they were maintaining their "Buy" call on the stock as the "accusations appear groundless."

In the note, Citi said Man Wah's practice of disclosing U.S. sales through a subsidiary in Macau was "common" for China-based exporters. Among other arguments, Citi also stated that it did not believe Man Wah's tax rate was "abnormally low."

Shares of Toshiba jumped 5.47 percent after the company said it was targeting to announce the winning bidder for its semiconductor arm next week, Reuters reported. Toshiba put its memory chip unit on sale in a bid to resolve issues in its balance sheet stemming from losses incurred by Westinghouse Electric, its U.S. nuclear arm.

Kazuhiro Nogi | AFP | Getty Images

Oil prices recovered slightly after sinking more than 5 percent overnight due to an increase in U.S. crude inventories. Brent crude was higher by 0.69 percent to trade at $48.39 a barrel while U.S. West Texas International crude gained 0.57 percent to trade at $45.98.

The dollar was dipped slightly against a basket of rival currencies at 96.666 at 2:50 p.m. HK/SIN, compared to levels around 96.730 seen in the previous session. Against the yen, the dollar traded at 109.53, compared to the 109.7 handle seen yesterday.

Meanwhile, the Australian dollar rose as high as $0.7553 after the beat in China trade data but later fell to levels seen before the release. Aussie/dollar last traded at $0.7549. April trade data in Australia earlier reflected a smaller than expected trade surplus.

The euro held firm to trade at $1.1252 ahead of a European Central Bank (ECB) meeting. The common currency had weakened slightly overnight following a Bloomberg report that suggested the ECB's inflation targets could be lowered.

Pound sterling was steady ahead of the U.K. election, trading near the two-week high of $1.2967 seen overnight. Pound/dollar last traded at $1.2963.

Any preliminary count that suggests May's Conservative Party is expected to expand their majority in parliament will be positive for the British pound for twenty-four hours, said Macquarie analysts Nizam Idris, Gareth Berry and Teresa Lam in a note.

"This may sound counter-intuitive given May has championed the cause of a hard Brexit, but this is how the market has traded (the) British pound headline risk consistently since the snap election was called," the analysts said, adding that the downtrend in the sterling "could resume within days" as Brexit negotiations begin.

Over in Japan, the second estimate of first quarter GDP reflected that the economy grew 0.3 percent compared to the previous quarter, lower than the 0.5 percent expected. First quarter GDP grew 1 percent on year compared to the 2.2 percent forecast.

In the U.S., stocks gained on Wall Street as investors digested Comey's opening remarks ahead of his testimony, with the Dow Jones industrial average rising 0.18 percent or 37.46 points to close at 21,173.69.