Asia Markets

Asian indexes pressured; Japanese defense stocks climb

Key Points
  • Asian markets closed mixed after U.S. stocks closed narrowly mixed
  • Oil prices came under pressure ahead of a November 30 meeting among major oil producers
  • SoftBank has proposed to buy Uber shares at a discount
  • Tax reform was in focus stateside, with the U.S. Senate expected to vote on a bill on Thursday

Most major Asian indexes closed mixed on Tuesday, following a narrowly mixed close on Wall Street overnight. With little data due during the session, markets turned their attention to events later this week.

Markets on the move

Japan's Nikkei 225 closed 0.04 percent below the flat line at 22,486.24 after a choppy session. Major exporters, including automakers and tech names, were mostly lower. Energy-related names also finished the session lower as oil prices edged down.

Defense-related plays, meanwhile, closed higher following headlines that Japan had noticed radio signals that North Korea could be making preparations for a ballistic missile launch. Defense-linked stocks trended higher, with Hoya Machinery surging 12.51 percent and Ishikawa Seisaku surging 8.43 percent by the end of the day.

Across the Korean Strait, the Kospi rose 0.25 percent to close at 2,514.19 despite some tech stocks extending Monday's declines. Heavyweight Samsung Electronics, however, reversed early losses to rise 1.22 percent after closing lower by more than 5 percent in the last session following a Morgan Stanley report that downgraded its stock. Other tech plays were mixed: SK Hynix fell 0.6 percent and LG Display edged down 0.16 percent. Manufacturing plays traded higher.

Down Under, the S&P/ASX 200 finished off 0.08 percent at 5,984.25, as a 1.33 percent fall in the telecommunications sector weighed on the index. Retailers climbed, but major miners finished the day with losses, with Rio Tinto and BHP down 0.76 percent and 2.04 percent, respectively.

Hong Kong's came under slight pressure, trading 0.31 percent lower by 3:19 p.m. HK/SIN. That followed a South China Morning Post report that Beijing will limit southbound capital in the Stock Connect. Chinese mutual funds intending to allocate less than half of their funds to the Hong Kong stock market will be approved, compared to earlier rules that allowed allocations above 80 percent, the Post said, citing sources.

Insurers traded lower, with AIA falling 2.58 percent and China Life Insurance dropping 1.88 percent by 3:31 p.m. HK/SIN.

Mainland markets, meanwhile, bounced back after coming under pressure in the past few sessions. The finished the session 0.34 percent higher at 3,333.66. The Shenzhen Composite rose 1.35 percent to end at 1,918.32, breaking a three-day losing streak. Consumer and materials names led gains, while the financial sector was the worst performer on both indexes.

MSCI's broad index of shares in Asia Pacific excluding Japan was off 0.05 percent at 3:27 p.m. HK/SIN.

U.S. stocks closed mixed on Monday, with retailers rising as markets bet on a strong holiday shopping season following Black Friday. Shares of U.S. chipmakers, however, struggled overnight.

The Dow Jones industrial average tacked on 0.1 percent, or 22.79 points, to close at 23,580.78 while other major indexes finished the session a touch softer.

The lead up

Tax reform was in focus stateside, with the U.S. Senate expected to vote on a bill on Thursday. Sen. Rand Paul, R-Ky., on Monday said he would vote in favour even though he still had some concerns. If the Senate bill is passed, joint legislation with the House — which passed its own version on Nov. 16 — will have to be created.

Meanwhile, the Senate confirmation hearing for Jerome Powell, President Donald Trump's nominee for Federal Reserve chair, is due to take place on Tuesday during U.S. hours. Markets are likely to keep watch for a sense of Powell's views on inflation, among other issues.

New home sales in the U.S. rose to their highest level in a decade in October. The metric rose 6.2 percent to 685,000 units, compared to the 6 percent fall forecast in a Reuters poll.

The dollar was mostly stable against a basket of currencies. The dollar index stood at 92.866 at 2:27 p.m. HK/SIN, compared to Monday's close of 92.899. Against the yen, the greenback edged up to trade at 111.16, after dipping as low as 110.92 earlier in the session.

"[A] bumpy ride is expected for the dollar if no clear progress is made on the tax bill," Zhu Huani, an economist at Mizuho Bank, said in a note.

Corporate news

Japan's Toray Industries falsified data at one of its units for eight years, local media said. Toray Hybrid Cord, a Toray subsidiary, falsified product data for goods that were sold to 13 clients, Kyodo reported. Several other Japanese firms, including Kobe Steel and Mitsubishi Materials, have been caught up in data fabrication scandals of late. Shares of Toray closed down 5.3 percent.

Meanwhile, Japan's SoftBank has proposed to buy Uber shares at $48 billion, Reuters reported, citing a source. That amount would be a 30 percent discount to Uber's valuation, Reuters added. SoftBank shares were off 0.25 percent by the end of the day.

Chinese automaker Anhui Jianghuai Automobile on Monday signed a memorandum of understanding with Volkswagen to develop joint venture models in China. The companies had earlier set up a joint venture focused on developing electric vehicles.

The commodities trade 

Oil prices were under pressure as investors weighed the impact of an upcoming meeting among major oil producers on U.S. shale prices. The slide in prices also came on the back of TransCanada announcing the Keystone pipeline would be restarted on Tuesday, Reuters said.

Ahead of the Thursday meeting, some analysts are expecting an OPEC-led agreement to curb output to be extended beyond its current March 2018 expiration.

"Based on the early readings of the OPEC meeting, and statements from Russia's oil minister, it looks as if an agreement to extend to end-2018 is nearly concluded after talks ahead of the full session," Anne-Louise Hittle, vice president of macro oils at Wood Mackenzie, said in a note.

Still, the decline in prices is seen to as a result of cautious sentiment ahead of the meeting, with other analysts highlighting uncertainty over Russia's position. "It is believed Russia wants language in the new agreement that would link the size of the curbs to the health of the oil market," Giulia Lavinia Specchia, an economist at ANZ, said in a morning note.

U.S. crude futures extended losses, slipping 0.5 percent to trade at $57.82 per barrel. U.S. crude had declined around 1 percent in the last session, having climbed to two-year highs in recent days. Brent crude futures edged down 0.09 percent to trade at $63.78.

— CNBC's Fred Imbert contributed to this report.