Asia report: Markets mixed as Brexit sensitivity continues

Markets in Asia ended mixed on Tuesday, with most of the major indexes extending their Monday gains as Brexit concerns continued to ease for the time being.

In Japan, the Nikkei 225 added 1.28% to finish at 16,169/11, reversing earlier losses of more than 1% as the yen was weaker against the dollar.

It was last 0.36% weaker against the greenback at JPY 104.31 per USD.

The weaker yen led to gains for Japan’s major exporters, with Nissan up 0.45%, Sony adding 2.43% and Toyota rising 1.24%.

On the mainland, the markets finished lower with the Shanghai Composite Index down 0.34% at 2,878.90, and the smaller Shenzhen Composite 1.01% lower at 1,889.71.

In Korea the Kospi was almost flat, adding 0.08% to 1,982.70, while Hong Kong’s Hang Seng Index added 0.77% to 20,668.44.

“The markets have a myopic focus on one thing: the UK referendum vote,” said IG chief market strategist Chris Weston.

Last week’s poor risk sentiment was stimulated northwards on Monday, after a number of polls on the Brexit vote published over the weekend suggested a swing back towards the ‘Remain’ vote.

Weston warned that the markets appeared to be over-sensitive to Brexit news, with the risk of another big sell-off if an opinion poll suggests a swing back to ‘Leave’ before Thursday’s vote.

“The polls were not supposed to influence as much as they have,” he said.

“Overnight, we have seen a rampant position adjustment and an unwind of Brexit hedges.”

Oil prices retracted during Asian trading, with Brent crude last down 0.92% at $50.20 per barrel and West Texas Intermediate down 0.69% at $49.62.

Data emerging from Genscape market intelligence during the session pointed to a drawdown of 568,213 barrels at the Cushing, Oklahoma base for US crude futures in the week to 17 June.

Down under, Australia’s S&P/ASX 200 added 0.33% to 5,274.36, with the weighty financials subindex rising 0.68% to lift the market.

The country’s major banks finished mixed - Australia and New Zealand Banking Group added 1.63%, Commonwealth Bank of Australia was up 1.19%, National Australia Bank fell 1.19% and Westpac was up 0.71%.

During the day, the Reserve Bank of Australia released its June monetary policy meeting minutes, with analysis from Goldman flagging a number of concerns around weakening momentum in the retail sector, employment growth and the “potential complication of an elevated currency.”

Goldman said they expect the central bank to head towards further easing to “mitigate the downside risks to growth and inflation.”

In New Zealand, the benchmark S&P/NZX 50 lost 0.4% to finish at 6,839.39, with analysts noting the movement as against what could be expected.

“The market's fall is unusual because there was an almighty rally overnight from the international markets, in particular the UK and Europe, and a material rally out of the US - we're bucking the trend by being in the red," said Craigs Investment Partners head of private wealth research Mark Lister.

The down under dollars gained once again on the greenback, with the Aussie last 0.61% stronger at AUD 1.3330 per USD and the Kiwi ahead by 0.56% at NZD 1.3972.