TOKYO: Asia markets took a breather on Tuesday, with major indexes in Japan and South Korea dropping at the open, following Monday’s global rally on easing Brexit concerns and gains in oil prices.
The benchmark Nikkei 225 dropped as much as 1.13 percent in early trade, before paring some losses to trade down 0.46 percent.
Japanese stocks were under pressure from renewed strength in the yen. The currency, which is considered a safe-haven asset, traded at 103.62 against the dollar at 8:13 a.m. HK/SIN, compared to levels near 104.69 on Monday afternoon local time.
Across the Korean Strait, the Kospi was down 0.28 percent. Australia’s ASX 200 advanced 0.40 percent, boosted by a 0.66 percent increase in the financials sub-index, which accounts for nearly half of the broader index.
Major Australian banks – ANZ, Commonwealth Bank of Australia, Westpac and NAB – traded up between 0.39 and 0.95 percent in early trade, fueled by higher finish in the European banking sector on Monday.
“The markets have a myopic focus on one thing: the U.K. referendum vote,” said Chris Weston, chief market strategist at spreadbettor IG.
Risk sentiment were given a fillip at the start of the week, after several new polls published in the United Kingdom (U.K.) at the weekend suggested a swing of momentum in favor of the remain camp. The polling data saw sterling rally, stocks rise and bond yields come off of the record lows reached in the previous week.
At 8:18 a.m. HK/SIN on Tuesday, the pound traded at $1.4662, up from levels near $1.40 in the previous week.
But analysts also warned that markets have become “hyper-sensitive” to Brexit news, and that if any opinion polls before the June 23 referendum vote indicated a resurgence in the leave campaign’s momentum, there could be another sell-off.
“The polls were not supposed to influence as much as they have,” said Weston. “Overnight, we have seen a rampant position adjustment and an unwind of ‘Brexit’ hedges.”
Oil prices pulled back Tuesday morning Asia time, after rising as much as 3 percent overnight. Global benchmark Brent was down 0.47 percent at $50.41 as of 8:24 a.m. HK/SIN, after gaining 3 percent overnight. U.S. crude was down 0.36 percent at $49.19 after adding 2.9 percent during U.S. hours.
Reuters reported data from market intelligence firm Genscape that pointed to a drawdown of 568,213 barrels at the Cushing, Oklahoma, delivery base for U.S. crude futures in the the week to June 17.
Gold prices rose on the back of faltering risk appetite in Asian markets, with spot gold up 0.20 percent at $1,292.36 as of 8:26 a.m. HK/SIN. The precious metal is also considered a safe-haven asset.
Stateside, the Dow Jones industrial average closed up 129.71 points, or 0.73 percent, at 17,804. The S&P 500 gained 12.03 points, or 0.58 percent, to 2,083.25, while the Nasdaq composite gained 36.88 points, or 0.77 percent, to 4,837.21.
