Asian Stocks Mixed, Awaiting Clarity in U.K. Election Results
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 20000. 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," Mr. 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.
Write to Lucy Craymer at Lucy.Craymer@wsj.com
Stocks geared to the U.K. economy fell sharply Friday while the pound slumped after British voters deprived Prime Minister Theresa May and her ruling Conservative party of a majority in Parliament.
Sterling was last down 2.4% at $1.2641 as investors feared a hung Parliament would usher in a fresh period of political uncertainty and make it more difficult for the U.K. to secure a favorable deal in its negotiations to exit from the European Union.
"Brexit still goes ahead, but who is negotiating and what their position is and whether they can do a deal and get it passed through Parliament is less clear," said John Stopford, head of multiasset income at Investec Asset Management.
London's FTSE 100 index, which generates roughly 70% of its revenues overseas, rose 1.3% in the early minutes of trading as exporters benefited from a weaker currency. Shares of British American Tobacco, which has almost no revenue ties to the U.K., rose 2%.
But companies who generate the bulk of their revenues in the U.K., including Lloyds Banking Group, Taylor Wimpey and Barratt Developments PLC fell 3.4%, 5.2% and 3.3% respectively. Stocks in the U.K. have historically fallen in the short-term following news of a hung parliament.
"We expect U.K. risky assets to come under pressure, as markets will start pricing in a scenario of high political uncertainty, a growth slowdown and possibly disorderly Brexit," said Daniel Vernazza, chief U.K. economist at UniCredit Research
Longer term, some investors see a move away from fiscal austerity and the possibility of a "softer" Brexit as potentially supportive for U.K. assets. But "at the moment, the market is focusing more on the uncertainty than any change in direction of monetary and fiscal policy" that could result, Mr. Stopford said.
Elsewhere in stocks, the Stoxx Europe 600 rose 0.3% in morning trading despite declines in real estate and travel shares. Futures pointed to a 0.2% opening gain for the S&P 500.
Earlier, Japan's Nikkei pushed back above 20000 as the dollar climbed against the yen, supporting exporters in the index. Shares of SoftBank jumped to 17-year highs following a surge in Alibaba shares in the U.S. The Japanese firm owns 28% of the Chinese internet heavyweight.
Korea's Kospi was up 0.8% and in fresh record territory, helped by a rise in shares of Samsung Electronics, which has the biggest weighting in the index.
Stock-market moves elsewhere in the Asia-Pacific region were more muted. Benchmarks in Australia were flat, while Hong Kong's Hang Seng Index fell 0.5%.
The moves followed a quiet session in the U.S. as investors appeared to show little reaction to Mr. Comey's testimony Thursday about interactions with President Donald Trump before his firing.
In commodities, Brent crude oil futures were down 0.2% and gold eased 0.3% as both were weighed down by a stronger dollar. The WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, was up 0.4%.
Write to Riva Gold at email@example.com and Lucy Craymer at Lucy.Craymer@wsj.com
(END) Dow Jones Newswires
June 09, 2017 03:54 ET (07:54 GMT)