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Asian shares close higher on last trading day of the quarter as China rebounds

Key Points
  • Asian markets gained on the last trading day of the quarter.
  • Sentiment appeared to improve as China markets recovered after a recent slump, although trade tensions simmered.
  • Oil prices slipped after gaining overnight although supply concerns remained.

Asian stocks closed with gains on the last trading day of the quarter, with regional markets turning higher through the session as China recovered from a recent slump amid worries over trade tensions between Washington and Beijing.

Japanese stocks pared earlier declines, with the Nikkei 225 closing up 0.15 percent, or 34.12 points, at 22,304.51. Pharmaceutical stocks led the move higher, while major exporters were mostly higher amid extended weakness in the yen, which traded at 110.62 to the dollar at 3:04 p.m. HK/SIN. For the quarter, the Nikkei rose 3.8 percent.

In South Korea, the Kospi moved back into positive territory, finishing higher by 0.51 percent at 2,326.13. Most tech plays climbed, with financials also contributing to the gains. Elsewhere, Australia's S&P/ASX 200 closed lower by 0.33 percent at 6,194.60.

Asia-Pacific Market Indexes Chart

China markets, meanwhile, recovered slightly after coming under pressure in recent sessions. The advanced 2.2 percent to close at 2,848.31 after four straight days of losses and the blue-chip CSI 300 index rose 2.57 percent. The smaller Shenzhen composite ended the session up 3.26 percent.

Hong Kong's rose 1.54 percent by 3:06 p.m. HK/SIN amid broad-based gains, with the consumer goods and information technology sectors leading gains before the market close.

The rebound came after China on Thursday took measures to reduce restrictions on foreign investments in industries, such as banking. Mainland markets have come under pressure of late as investors worried over the implications of trade tensions between Washington and Beijing.

Despite Friday's gains, both the Shanghai composite and Shenzhen composite remained in bear market territory, meaning they have dropped at least 20 percent from recent highs. For the quarter, Shanghai shares are down some 12 percent.

Going into the third quarter, the U.S.-China trade dispute is expected to remain a key risk that investors in the region are watching along with tighter U.S. monetary policy.

"The consequences of U.S. monetary policy normalization, moderately higher inflation and U.S.-China trade tensions top our list of worries, but do not change our broadly optimistic view on world growth. We are mindful, however, that the combination of worsening trade outcomes, higher oil prices and a hawkish Fed may dent confidence further in 2018 and beyond," Standard Chartered Global Chief Economist David Mann said in a note.

MSCI's broad index of shares in Asia Pacific outside Japan was up 1.36 percent, retracing some of its recent losses after falling to a nine-month low on Thursday. For the year's second quarter, the index was down 5.81 percent.

That also extended gains seen stateside, where improved investor sentiment saw stocks finish the session higher on the back of gains in banks and technology stocks.

The Dow Jones Industrial Average rose 0.41 percent, or 98.46 points, to close at 24,216.05, with other major indexes recording slightly steeper gains. Meanwhile, U.S. Treasury yields edged marginally higher overnight after U.S. gross domestic product growth slowed more than expected. The yield on the benchmark 10-year Treasury note was last at 2.84 percent.

Moves higher in the session also came after regional markets closed lower on Thursday amid worries over trade tensions, which have weighed on investor sentiment in recent weeks. Those declines came despite the U.S. government being seen to adopt a less harsh tone on Chinese investments in U.S. tech.

Oil prices pared some overnight gains, but was broadly supported by ongoing supply concerns. U.S. crude futures were lower by 0.38 percent at $73.17 per barrel after touching a three and a half year high overnight. Brent crude futures were off by 0.14 percent at $77.74.

On the corporate front, smartphone maker Xiaomi priced its Hong Kong initial public offering at the lower end of an indicative range on Friday. Shares were priced at 17 Hong Kong dollars ($2.17) apiece, raising around $4.72 billion in total, Reuters said, citing sources. The retail portion of the offering was 8.5 times overbought, the South China Morning Post reported.

Elsewhere, shares of Sharp rose 15.19 percent. The pop in share price came after the company said it had dropped plans to issue as much as $2 billion in new shares, Reuters said.

In economic news, the jobless rate in Japan dropped to its lowest in more than 25 years, Reuters said. Meanwhile, Japanese industrial output for May declined 0.2 percent, which was less than the median 1.1 percent drop forecast in a Reuters poll.