Asia report: Nikkei shrugs off typhoon to hit new high, banks drag on Aus

Japan took centre stage at the start of the month, with Tokyo's Nikkei index breaking through a new 27-year-high, while even though China and Hong Kong markets were closed for the week, data from the People's Republic still cast a shadow.

Despite a fierce typhoon that raked the country, the Nikkei 225 climbed 0.52% to 24,245.76 by the end of trading on Monday as the yen softened 0.26% against the dollar to JPY 113.96. The wider Topix 500 recovered from early losses to close fairly flat at 1,817.96, with the brakes being put on by the auto giants such as Toyota and Nissan.

The yen dipped on the triple impact of a the typhoon, a disappointing business confidence survey and a boost to the dollar from Canada and the US signing of a new trade agreement to replace Nafta.

Japan’s car manufacturers could benefit from the US and Canada’s new trade deal, a report from Bloomberg suggested, as manufacturers such as Toyota and Honda build cars in Canadian factories for the US market.

With Canadian auto exports to the US escaping tariffs up to a certain threshold under the new deal, the news could result in a future boost to the two companies.

"Investors are still very cautious,” analyst at Tokai Tokyo Research Center said. ”The business environment under President Trump is tougher for Japanese automakers” and “they will still need to adjust production within the Nafta region to meet local content requirement.”

With the China holidays, plus the influence of the typhoon, Stephen Innes, head of trading APAC at Oanda said it had been "tough to get a good feel of local Asia markets given the diminished liquidity".

Looking at the yen-dollar he said "the waiting game starts" as the markets pivots to Friday's US non-farm payroll report. "Yes, I know its only Monday, but Friday report will take on the tremendous importance for near-term USD momentum."

Even though China’s stock market was shut for week-long national celebrations, two key manufacturing surveys were released over the weekend. China's official manufacturing purchasing managers index (PMI) fell much more than expected in September to from 51.3 to 50.8, coming in short of economists' forecasts for a reading of 51.2. Earlier the Caixin's factory sector PMI slipped from 50.6 for the month of August to 50.0 in September, versus the 50.5 expected.

This "cast a very gloomy shadow over local sentiment", said Innes. "The export components shrunk at the fastest pace since February 2016. Indeed, trade frictions are to blame. Equity markets that are open are trading mixed as the US 10y yield are back up at 3.07, and predictably USD Asia moved higher. While tariffs are causing some fraying at the brick and mortar level, China continues to support the demand side of the equation so while the manufacturing PMI is weak; we could expect some immediate damage control from both the fiscal and monetary policy tweak, so by no means is the damage irreparable."

Elsewhere, the South Korean Kospi dropped by 0.18% to 2,338.88 as Samsung fell by 0.22% as investors continued to feel unease related to legal proceedings against senior staff at the company.

The company’s chief executive Lee Sang-hoon and a number of other executives were indicted by prosecutors last week for alleged attempts to sabotage the formation of a worker’s union at the electronics giant.

Meanwhile, looking at oil, Brent crude was up 0.59% at $83.22 and West Texas Intermediate rising 0.35% to $73.51.

Down in Australia, the S&P/ASX 200 was down 0.57% at 6,172.26, the the worst performance in more than a fortnight, as the country’s markets continued to suffer in the wake of a Royal Commission report into misconduct by the banking sector.

Sydney-based Westpac, one of Australia’s big four banking firms, dropped by 1.54% in Monday trading following the report, which condemned “greed” of the sector and its “pursuit of short-term profit at the expense of basic standards of honesty”.

Across the sea New Zealand’s S&P/NZX 50 dropped 0.25% to 9,327.27.

The Australian dollar increased against the US by 0.07% to AUD 1.3854, while New Zealand’s dollar also strengthened against the greenback, rising 0.17% to NZD 1.5127.