Asia Markets

Asia markets mixed as investors search for guidance on trade and Brexit

Key Points
  • Asia markets traded mixed on Friday as investors searched for guidance on developments in the U.S.-China trade war and in the U.K.'s planned departure from the European Union.
  • Shares of SK Hynix jumped after the company revealed third-quarter earnings on Thursday where on-quarter revenue improved, pointing to signs of recovery in the chip sector.
  • In prepared remarks, U.S. Vice President Mike Pence said Washington "does not seek confrontation with China," nor does it want to "contain China's development."

Asia markets traded mixed on Friday as investors searched for guidance on developments in the U.S.-China trade war and in the U.K.'s planned departure from the European Union.

The Nikkei 225 in Japan eked out a 0.22% gain to close at 22,799.81 while the Topix index added 0.29% to 1,648.44.

In South Korea, the Kospi index erased earlier losses to rise 0.11% to 2,087.89. Shares of major chipmaker SK Hynix jumped 3.63%.

The company revealed third-quarter earnings on Thursday where revenue fell 40% on-year and net profit was down 89% for the same period. Still, revenue rose 6% from the previous quarter due to signs of demand recovery and pricing in the memory chip market.

Rival Samsung Electronics traded up 0.39%. The world's largest smartphone and chipmaker is due to release official earnings on Oct. 31, but previously in guidance said it expects operating profit to drop by more than half from a year ago.

Chipmakers have struggled in an environment where price and demand for memory chips have been low for almost a year due to inventory adjustments and a supply glut.

Australia's benchmark ASX 200 rose 0.68% to 6,739.20, with most sectors advancing. In Hong Kong, the Hang Seng index dropped 0.36% in late-afternoon trade.

Chinese mainland markets erased early losses to climb in the afternoon: The Shanghai composite rose 0.48% to 2,954.93, the Shenzhen composite reversed losses to trade up 0.99% at 1,632.40 and the Shenzhen component index advanced 1.1% to 9,660.44.

Overall, MSCI's broadest index of Asia-Pacific shares outside Japan was flat in the afternoon.

Friday's session followed a mixed finish in the U.S. overnight where the S&P 500 posted a slight gain on one of the busiest days of the earnings season.

U.S. Vice President Mike Pence delivered a speech Thursday on the future of the relationship between the United States and China. In prepared remarks, Pence said Washington "does not seek confrontation with China," nor does it want to "contain China's development."

Still, Pence criticized Beijing's construction of a "surveillance state," and "increasingly provocative" military action, as well as its handling of the protests in Hong Kong, Reuters reported.

"Market fear was that the speech would be a 'bad cop' speech that derailed progress on a US-China trade deal," Tobin Gorey, an agricultural commodities strategist at the Commonwealth Bank of Australia wrote in a morning note. "We thought that unlikely despite this US administration often being tagged as somewhat chaotic."

Gorey explained that the real target of Pence's speech was the "domestic political debate."

The Trump administration is currently negotiating with Beijing to pen down a trade agreement that would address issues including trade deficits, intellectual property theft, and forced technology transfers.

ECB meeting

Elsewhere, the European Central Bank kept its policy rates unchanged and kept its forward guidance that suggested the bank's main interest rates will remain at their current or lower levels until there's strong evidence of a pick-up in prices. It was also ECB President Mario Draghi's last monetary policy meeting at the institution.

The euro traded at $1.1105, slightly off from an earlier high of $1.1112.

U.K. Prime Minister Boris Johnson, meanwhile, has said he will give lawmakers more time to study his Brexit deal but only if they agree to a general election on Dec. 12. Following this week's developments, where lawmakers agreed in principle to Johnson's plans but rejected the limited timeframe to review legislation, the U.K. is unlikely to depart the European Union by the previous deadline of Oct. 31.

The EU is currently deciding how long an extension it wants to give the U.K. for membership while it attempts to agree on a withdrawal deal among its lawmakers.

The British pound was fractionally lower at $1.2844 from its previous close at $1.2850.

"So against a slightly risk off backdrop with renewed Brexit uncertainty, downbeat EU economic outlook and a firm position from the US on China, the (dollar) has regained a bit of its mojo," Rodrigo Catril, senior foreign-exchange strategist at the National Australia Bank, wrote in a morning note.

Currencies and oil 

The dollar index, which measures the greenback against a basket of its peers, traded at 97.675, about 0.05% higher than its previous close.

The Japanese yen, considered a safe-haven asset, changed hands at 108.63 per dollar, while the Australian dollar traded at $0.6825.

Oil prices declined Friday during Asian hours: Global benchmark Brent fell 0.16% to $61.57 per barrel while U.S. crude futures were also down 0.27% at $56.08.