Major Asia Markets Fall as Risks of No-Deal Brexit Resurface

Markets in Asia mostly fell by the close on Wednesday afternoon, as risks of a no-deal Brexit ramped up again overnight.

In mainland China, the Shanghai composite was down 0.18% to close at 3,017.04, while the Shenzhen composite closed flat to 1,709.44. The Shenzhen component lost 0.11% to 10,294.66.

Hong Kong’s Hang Seng index was down 0.12% in its final hour of trade.

Japan’s Nikkei 225 lost 0.55% to close at 23,934.43, while the Topix slumped 0.50% to 1,738.40.

Japan’s exports fell 7.9% in November from a year earlier, declining for the 12th straight month, according to data from the country’s Ministry of Finance on Wednesday. However it still beat a forecast of a 8.6% drop in a Reuters poll, and was better than the 9.2% decline in October.

Imports, however, did worse than expected — falling 15.7% as compared to an estimated 12.7%.

Over in South Korea, the Kospi declined 0.25% to 2,194.76. Australia’s S&P/ASX 200 closed nearly flat at 6,851.40.

Overall, MSCI’s broadest index of Asia-Pacific shares outside Japan was flat.

Meanwhile, Brexit risks flared amid reports on Tuesday that U.K. Prime Minister Boris Johnson will amend the Brexit bill, explicitly ruling out any extension to the transition period beyond December 2020. The U.K. is due to leave the EU by Jan. 31.

That would leave little time to reach a trade deal with the European Union, raising the risks of a no-deal Brexit.

The British pound dropped more than 1% to $1.3188 against the dollar on Tuesday after the reports, and has since fallen further. It was last at $1.3111.

Rodrigo Catril, senior foreign exchange strategist at the National Australia Bank, called the development a “smart move” by Johnson, who now has a “stronger negotiating position.”

“From a strategic move one could argue that this is a smart move by the PM, forcing the EU to come to the table and push for an agreement in 2020 without the option of kicking the can yet again,” he wrote in a morning note.

“The move suggest GBP path in 2020 looks set to be a volatile one, a hard Brexit cannot be ruled out, but the probability of a positive Brexit resolution has also increased,” Catril said, adding that the possibility remains that Johnson could still introduce a new bill for an extension next year.

Exporters in Asia were watched on Wednesday for reaction to that news. Autos in Japan declined in the morning, with Mitsubishi down 0.83%, and Honda declining 0.56%. Toyota lost 0.51%, and Suzuki tumbled 0.67%.

In other news, the Hong Kong Stock Exchange wants to cut the time between pricing an IPO and the shares trading to a single day by as early as late 2020, according to a Reuters report, citing a senior executive.

Meanwhile, over in the U.S., the S&P 500 rose to another new record on Tuesday. It closed just above the flatline at 3,192.52 and reached an intraday record of 3,198.25. The S&P 500 also closed higher for the fifth straight session. The Dow Jones Industrial Average and Nasdaq Composite also ended the day with record closing highs. The Dow climbed 31.27 points, or 0.1% to 28,267.16 while the Nasdaq rose 0.1% to 8,823.36.

Currencies and oil

The U.S. dollar index, which tracks the greenback against a basket of its peers, was last at 97.311 after touching lows below 97.0 earlier this week.

The Japanese yen traded at 109.44 against the dollar, weakening from levels below 109.2 in the last few days. The Australian dollar last changed hands at $0.6843, strengthening slightly from a previous low of 0.6835.

U.S. crude tumbled 0.77% to $60.46 during the morning Asian trading hours, after rising earlier this week — boosted by trade hopes and supply cuts. Brent crude declined 0.57% to $65.72 per barrel.

Author: Weizhan Tan

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