Asia Markets

Asia markets shrug off North Korea missile to close mostly higher

Key Points
  • North Korea on Wednesday local time launched what was likely an intercontinental ballistic missile that landed in the Sea of Japan
  • Asian indexes shrugged off the latest launch to close mostly higher
  • Korean stocks sensitive to THAAD-related developments were mixed, but cosmetics names climbed
  • Greater China markets ended in positive territory despite cautious early trade
  • The dollar index gave up some gains after firming overnight

Asian markets closed mostly higher on Wednesday as investors mostly shrugged off North Korea's latest missile launch.

North Korea launches new missile

North Korea on Wednesday local time launched a likely intercontinental ballistic missile that landed in the Sea of Japan, according to the Pentagon. The launch, the North's first since Sept. 15, came after the U.S. classified North Korea as a country that supported terrorism on Nov. 20.

Following the launch, President Donald Trump said the U.S. would "take care of" the situation. Japanese Prime Minister Shinzo Abe and Trump have also agreed to increase their cooperation on the North, Reuters said, citing Japanese media.

North Korea later boasted through local media that its new ICBM was capable of reaching the U.S., but the rogue nation claimed its weapons program would not threaten countries that did not infringe on the North's sovereignty.

Markets on the move

Despite that, most markets in Asia edged higher, following the strong lead from U.S. stocks on tax reform progress and after Federal Reserve Chair nominee Jerome Powell's Senate testimony.

"The markets seem to be more immune than in the past to North Korea's missile testing," Prakash Sakpal, Asia economist at ING, said in a morning note.

Japan's Nikkei 225 shrugged off the North's latest missile launch and rose 0.49 percent by the end of the day, closing at 22,597.2. Major exporters were in focus as the dollar held onto overnight gains against the yen. Automakers traded mixed, but tech names closed mostly higher. Trading houses and financials also notched gains.

Retail sales in October declined 0.2 percent compared to one year ago, although the figure remained in line with what was forecast in a Reuters poll. That was the first fall in yearly retail sales in a year, Reuters said.

Across the Korean Strait, the benchmark Kospi index was little changed, closing lower by 0.05 percent at 2,512.9 as several blue-chip tech names declined. Heavyweight Samsung Electronics closed down 1.28 percent while companies sensitive to developments related to the THAAD anti-missile system closed lower: Lotte Shopping fell 2.34 percent and LG Household and Healthcare lost 0.41 percent by the end of the day.

Shares of cosmetics names Amorepacific and Cosmax closed up 1.45 percent and 4.88 percent, respectively, following news that China would once again let travel agencies resume selling tour packages to South Korea.

Down Under, the S&P/ASX 200 finished the session 0.45 percent higher at 6,011.12, with heavily-weighted financial stocks climbing 0.62 percent. Sector-wise, utilities and retail names led gains on the index.

Greater China markets came under some pressure earlier in the day, although mainland indexes ended in positive territory. The tacked on 0.13 percent to close at 3,338 as property shares notched gains, with Poly Real Estate rising 10.02 percent. The Shenzhen Composite added 0.04 percent to end at 1,919.06. The sell off in blue chips on the mainland also moderated, with the CSI 300 index closing the session lower by 0.05 percent after recording declines around 1 percent earlier.

Meanwhile, Hong Kong's was off 0.04 percent at 3:11 p.m. HK/SIN. Of particulate note, its one-month interbank offered rate, often referred to as Hibor, rose above the 1 percent level on Wednesday.

Meanwhile, MSCI's broad index of shares in Asia Pacific excluding Japan was slightly higher, rising 0.24 percent at 3:18 p.m. HK/SIN.

In other news, bitcoin crossed the $10,000 mark early on Wednesday, according to industry site CoinDesk. The cryptocurrency has risen some 900 percent in value year-to-date.

U.S. stocks closed the Tuesday session higher as markets focused on tax reforms. Financials also got a boost following Powell's comments on regulation.

Major U.S. indexes closed at record highs, with the Dow Jones industrial average rising 1.09 percent, or 255.93 points, to close at 23,836.71.

The lead up

Stateside, markets turned their attention to tax reform after the Senate Budget Committee approved the Republican tax bill, a crucial step toward a vote in the full chamber later this week. Senate Republicans, who hold 52 seats, can only afford to lose two votes to still pass the bill under special budget rules.

Meanwhile, Federal Reserve chair nominee Jerome Powell indicated the case for a December rate hike was "coming together." Powell also said he favored "tailoring" regulations on financial institutions, adding that regulation on smaller banks ought to be decreased in intensity.

The dollar gave up some gains after broadly firming overnight following Powell's comments. That index stood at 93.147 at 3:05 p.m. HK/SIN, after trading at the 92.8 handle earlier in the week.

The dollar was steady against the Japanese currency, with the greenback fetching 111.44, compared to Tuesday's close of 111.45.

Also of note were reports that a divorce bill between the U.K. and the European Union had been agreed upon, with newspapers citing a sum around 50 billion euros ($59 billion), according to Reuters.

The extended overnight gains to trade at $1.3373 at 3:07 p.m. HK/SIN, rising as high as $1.3390 on Wednesday compared to a low of $1.3219 in the last session.

The commodities trade

Oil prices came under pressure ahead of a Thursday meeting of major oil producers. U.S. West Texas Intermediate shed 0.38 percent to trade at $57.77 per barrel. Brent crude futures declined 0.49 percent to settle at $63.30 per barrel.

Corporate news

Alibaba Group is selling a multi-tranche dollar bond which will price during U.S. hours, Reuters reported, citing a term sheet. The bond has five tranches — 5.5-year, 10-year, 20-year, 30-year and 40-year — and price guidance was indicated at approximately 100, 130, 140, 160 and 180 basis points above U.S. Treasurys, respectively.

Elsewhere, Vietnam intends to sell 54 percent of Sabeco, the country's largest producer of beer, according to Reuters. Total foreign ownership in the brewer would be limited at 49 percent, Reuters added, citing an official.

— CNBC's Jacob Pramuk and Nyshka Chandran contributed to this report.