Asia report: Markets higher as investors decrypt Trump's direction

Markets in Asia finished mostly in the green on Monday, with investors once again trying to decrypt the haphazard policy coming out of the Trump administration in the US.

In Japan, the Nikkei 225 was 0.31% higher at 18,976.71, with new official data pointing to a year-on-year inflation-adjusted drop in wages for December - the first decline in a year.

Government officials pointed to a rise in the cost of living beyond nominal pay increases as being behind the fall.

The yen was stronger on the dollar, last sitting 0.16% ahead at JPY 112.43 per $1.

On the mainland, the Shanghai Composite added 0.55% to 3,157.37, and the Shenzhen Composite gained 0.93% to 1,927.57.

China’s unofficial Caixin purchasing managers’ index for January was released during the session, with a relatively strong reading of 53.1 - though that was a drop from the 53.4 seen in December.

Hong Kong’s Hang Seng Index finished 0.95% higher at 13,348.24, while South Korea’s Kospi was up 0.22% at 2,077.66.

The overbearing theme in the markets remained the US, where President Donald Trump has spared no moment in releasing policy on financial deregulation, immigration and everything in between since his inauguration on 20 January.

Vishnu Varathan at Mizuho bank said the market was caught between ‘Trumpflation’ and ‘Donald Doubt’ in a note on Monday.

He said Trumpflation was a situation of higher yields and a stronger greenback, and Donald Doubt was the result of protectionism - a softer dollar and lower yields.

“Fading Trump-phoria and rising policy execution doubts, on top of activity improvement globally, drive US dollar lower in the interim,” Varathan noted.

Geopolitics were also at the fore in the region, as US Defense Secretary James Mattis paid a visit to South Korea and Japan in the latter part of last week.

On his visit, Mattis stoked the flames of tension by reiterating the ongoing commitment from the US to defend Japan’s territory - including the disputed Senkaku islands in the south of the country.

China - which claims the islands - fired back at Mattis, warning it not to involve itself in its sovereignty claim over the islands it calls Diaoyu.

Oil prices were higher during Asia trading, though they were mixed as the trading baton was handed to Europe, with Brent crude last down 0.02% at $56.80 per barrel and West Texas Intermediate up 0.17% at $53.92.

Australia’s S&P/ASX 200 was off 0.11% at 5,615.58, after fresh data showed retail sales fell 0.1% month-on-month in December.

That was a swing from Reuters-polled expectations for a 0.3% rise in retail spending during the usually busy Christmas shopping period.

National Australia Bank’s stock went against the market, rising 0.76%, after it posted a 1% drop in first quarter cash profits to AUD 1.6bn.

New Zealand’s markets were closed for the Waitangi Day national holiday - a day usually fraught with political tensions, though this year’s edition was relatively quiet on that front.

The markets in the Pacific island nation did have something to react to on Tuesday morning, however, with New Zealand’s Prime Minister Bill English taking a phone call from a “warm, civil and very thoughtful” Donald Trump.

That was a stark contrast to the call received last week by English’s counterpart in Australia, Malcolm Turnbull, in which Trump said it was the “worst” phone call he’d had with a foreign leader, and hung up 25 minutes into the scheduled one hour conversation.

The down under dollars were weaker, with the Aussie last off 0.29% at AUD 1.3055 per $1 and the Kiwi weakening 0.01% to NZD 1.3674 against the greenback.