Asia report: Markets mixed as trade optimism wanes

Markets in Asia finished in a mixed state on Wednesday, with investors keeping their wallets closed as they awaited further developments on the US-China trade front.

In Japan, the Nikkei 225 was up 0.22% at 23,303.82, as the yen strengthened 0.13% against the dollar to JPY 109.02.

Of the major components on the benchmark index, automation specialist Fanuc was up 1.17%, fashion firm Fast Retailing added 0.31%, and technology conglomerate SoftBank Group was 0.65% stronger.

The broader Topix index managed to break back into the green in the final minutes of trading, rising 0.02% to close its trading day at 1,694.45.

On the mainland, the Shanghai Composite lost 0.43% to close at 2,978.60, and the smaller, technology-heavy Shenzhen Composite was 0.87% lower at 1,641.23.

Renminbi was once again in focus in China, after the currency strengthened past 7.00 against the dollar on Tuesday - the first time it had done so since August.

The People’s Bank of China set its reference for the onshore yuan at CNY 7.0080 per dollar on Wednesday, which is the strongest level since 8 August.

It allows the onshore yuan to trade at 2% either side of its daily loose peg, while the offshore yuan floats freely.

South Korea’s Kospi eked out gains of 0.07% to finish at 2,144.15, while the Hang Seng Index in Hong Kong closed just above the waterline, adding 0.02% to 27,688.64.

The blue-chip technology stocks were mixed in Seoul, with Samsung Electronics up 1.14%, while chipmaker SK Hynix closed 1.88% lower.

Investors were holding their collective breath for further developments in the ongoing trade war between the US and China for much of the session, after the South China Morning Post reported that “firmer commitments on lifting tariffs” were required before Beijing officials would visit Washington.

The Hong Kong newspaper report was the latest in a series of pressures being applied by Beijing, in a bid to get Donald Trump’s administration to further ease its punitive tariffs on around $125bn of Chinese goods, which came into effect in September.

Both countries have been locked in a tit-for-tat war of tariffs for more than a year, although recent market sentiment has reflected a belief that a first phase deal could be struck in the very near future.

“With all the US, China trade war optimism helping push equity markets to new record as well as multi-month highs it was perhaps inevitable that we’d see a little consolidation as investors mull the idea that perhaps we’ve start to price in a little too much optimism,” said CMC Markets analyst Michael Hewson.

“China’s insistence that any phase one deal needs to see the removal of some tariffs could well be a deal breaker, or see any conclusion to this phase of talks pushed out into next year.”

Oil prices were lower as the region went to bed, with Brent crude last down 0.67% at $62.54 per barrel, and West Texas Intermediate down 0.46% at $56.97.

In Australia, the S&P/ASX 200 fell 0.55% to 6,660.20, while across the Tasman Sea, New Zealand’s S&P/NZX 50 was off 0.8% at 10,759.18.

Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.12% at AUD 1.4488, and the Kiwi advancing 0.06% to NZD 1.5676.