Asia report: Markets finish muted with Brexit deal in focus

Markets in Asia finished in a muted state on Monday, as developments on the Brexit front over the weekend worsened investor anxiety over the United Kingdom’s planned departure from the European Union.

In Japan, the Nikkei 225 was up 0.25% at 22,548.90, as the yen weakened 0.1% against the dollar to last trade at JPY 108.56.

Of the major components on the benchmark index, automation specialist Fanuc was down 0.71%, fashion firm Fast Retailing lost 0.33%, and technology conglomerate SoftBank Group was 0.02% weaker.

The broader Topix index was 0.41% stronger in Tokyo, finishing the trading day there at 1,628.60.

On the mainland, the Shanghai Composite managed gains of 0.05% to close at 2,939.62, and the smaller, technology-heavy Shenzhen Composite fell 0.11% to 1,614.87.

South Korea’s Kospi was 0.2% firmer at 2,064.84, while the Hang Seng Index in Hong Kong eked out gains of 0.02% to close at 25,725.68.

Both of the blue-chip technology stocks were in the green in Seoul, with Samsung Electronics up 0.8% and SK Hynix managing gains of 0.13%.

Investor attention was focussed on Europe at the start of the Asian day, and the future of the relationship between the United Kingdom and the European Union, after UK prime minister Boris Johnson suffered a setback in his Brexit plans on Saturday.

Johnson had wanted MPs to approve his Brexit deal struck with Brussels last week, but instead members of the House of Commons approved an amendment tabled by backbencher Oliver Letwin, withholding their support for the deal until the necessary legislation to implement it was in place.

The amendment was intended to stop Johnson’s executive from intentionally frustrating the implementation of the required laws, which would cause the UK to crash out of the EU with no deal at the end of the month.

Pantheon Macroeconomics chief UK economist Samuel Tombs told clients that the lack of a UK-wide backstop in the deal meant that firms were now facing the risk of customs controls being imposed at some stage, and of being left outside the single market for trade in goods.

If Johnson's deal was approved, Tombs said he would cut his forecast for UK GDP growth in 2020 from 1.4% to 1.2%, instead of marking it up to 1.8% as he would have had Theresa May's proposed deal been signed off.

Across the Atlantic, investors were also watching ongoing trade discussions between the United States and China, with the latter’s vice-premier Liu He reporting that the two economic superpowers had made “substantial progress”.

It came after the People’s Republic reported that its economy grew 6% year-on-year in the third quarter, which was the slowest GDP gain for China in more than 27 years.

Oil prices were lower as the region went to bed, with Brent crude last down 1.09% at $58.78 per barrel, and West Texas Intermediate falling 0.67% to $53.42.

In Australia, the S&P/ASX 200 managed to keep its head above water, closing its trading session up 0.04% at 6,652.50.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 was down 0.04% at 11,062.75, led lower by Tourism Holdings, which plunged 10.6%.

The company had pre-empted its annual meeting, due to take place on Wednesday, by telling the market that it had experienced a 40% decrease in margins for its vehicle sales in the US, which - if sustained - would see its annual profit weaken.

Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.3% at AUD 1.4540, and the Kiwi advancing 0.37% to NZD 1.5601.