ASIA MARKETS: Nikkei Returns To 20,000 As Asian Markets Warily Eye U.K. Election

Pound drops, but expert says election-related spikes likely will be short-lived

Asian stocks started Friday trading mixed, in a wait-and-see mode as exit polls suggested the U.K.'s governing Conservative party failed to keep its parliamentary majority in Thursday's general election there.

The polls sent the pound down some 2% versus other currencies, but moves in other markets have been muted. S&P 500 futures were recently down 0.1%.

"Obviously it's looking more and more likely that we are going to see a hung government" and "the uncertainty that that brings is not good for" stocks anywhere, said Grant Williamson, a director at New Zealand advisory firm Hamilton Hindin Greene.

But he also cautioned that election-related market moves are likely to be short-lived: "You'll get a one- or two-day selloff, but the market is pretty resilient."

Australia's S&P/ASX 200 was recently down 0.2% and New Zealand's NZX-50 eased 0.4%.

But investors in Japan and Korea seem to have other factors in mind. The Nikkei , which fell in the last hour of Thursday's trading amid a rally in the yen that was reversed later Thursday, rose 0.3% early Friday to move back toward 20,000. And the Kospi , which rallied into the close Thursday after initial weakness following North Korea's latest missile launches, rose 0.3% Friday to move back to the cusp of fresh record highs.

After the pound slumped toward $1.2715 following the exit-poll release, it moved back to $1.28 before fresh selling in recent minutes briefly sent sterling below $1.27 before retracing to $1.2725. "Right now, you could say we've priced in a hung-parliament scenario, which clearly puts sterling on the back foot," said Stuart Ive at OM Financial.

However, analysts have been quick to say it is still early and there could be a number of changes before the result of the election becomes clearer. "We've still got an hour or two to go yet," Ive added.

Elsewhere, the testimony from former Federal Bureau of Investigation head James Comey elicited little new information and isn't expected to have a significant impact on Asian trading; U.S. stocks rose slightly overnight.

"At this stage, markets appear to be taking a relatively watchful stance" to the testimony, said ANZ. It added that with 10-year Treasury yields around 2.2%, the Trump trade has nearly been unwound -- meaning there should be little impact to yields if any fiscal package is delayed.

"Whether the same can be said for equities though (which have not pulled back at all) is a different question," the investment bank added.

In commodities, oil futures are down some 0.3%, with Brent futures at $47.70 a barrel, while gold is slightly higher in Asia after falling some 1% in U.S. trading.

(END) Dow Jones Newswires

June 08, 2017 22:36 ET (02:36 GMT)