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Asia: Shares retreat amid countdown to Brexit vote; oil rallies

Wednesday, June 22, 2016 - 09:52
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[WELLINGTON] Most Asian stocks fell, while the pound maintained losses as traders moved to the sidelines ahead of Britain's vote on its membership in the European Union. Oil rallied before US stockpiles data.

The prospect of the UK voting for Brexit continues to hang over markets, with polls still split on the outcome a day before Britons head to the ballot box. Japan's Topix index fell from a 1 1/2-week high even after the yen ended its seven-day surge, while Korean and Australian stocks climbed for a fourth session.

Crude swung back to gains as analysts predicted US oil supplies fell last week. The pound nursed Tuesday's pullback as Australian bonds fell.

Financial markets remain on edge ahead of Thursday's UK referendum, amid concern a vote to leave the EU could stoke anti-establishment sentiment elsewhere and fuel instability.

Global stocks have rallied this week as betting shops put the probability of a Brexit at about 26 per cent, the lowest level this month. At the same time, investors are grappling with further evidence that world growth remains tepid, with Federal Reserve Chair Janet Yellen telling the US Senate Tuesday that she wants the economy to be on a "favourable path" before the central bank considers hiking benchmark interest rates.

"It would be logical for markets to begin losing momentum and volume while they wait on the outcome of the Brexit vote," Ric Spooner, chief market analyst in Sydney at CMC Markets, said in an e-mail to clients.

"Short-term traders cannot be blind to the risks that despite recent confidence high volatility and short term illiquidity remain a possibility as the results of the Brexit vote unfold."

Australia releases figures on skilled vacancies Wednesday and New Zealand reports on card spending. Economists project the Bank of Thailand will keep benchmark interest rates on hold in a review, while Malaysian markets are closed for a holiday.

The MSCI Asia Pacific Index dropped 0.3 per cent as of 9:58 am Tokyo time, as the Topix slipped 0.9 per cent. Trading volumes in Japan were about 23 per cent below the 30-day average. Australia's S&P/ASX 200 Index rose 0.2 per cent as the Kospi index in Seoul added 0.5 per cent. New Zealand's S&P/NZX 50 Index dropped 0.3 per cent.

"What investors hate the most is uncertainty," said Chihiro Ohta, a senior strategist at SMBC Nikko Securities Inc in Tokyo.

"Most are just waiting on the sidelines to see what happens."

Futures on the S&P 500 Index fell 0.1 per cent, after the US measure extended its advance into a second day on Tuesday, rising 0.3 per cent to 2,088.90. Contracts on Hong Kong's Hang Seng China Enterprises Index slipped 0.1 per cent late on Tuesday.

Sterling added 0.1 per cent to US$1.4671 after slipping 0.3 per cent on Tuesday. Different polls continue to put each side ahead in the referendum as the UK enters the last day of campaigning.

Bets on Brexit winning the day have fallen from 43 per cent a week ago, with the killing of pro-Europe lawmaker Jo Cox last Thursday spurring a paring in odds.

The yen was little changed at 104.62 per dollar after weakening 0.8 per cent last session. The currency, which is regarded along with gold and government debt as a haven investment, had rallied 2.8 per cent over the seven days to Monday amid mounting anxiety ahead of the British vote.

The euro weakened 0.2 per cent against the yen and the pound, while the Thai baht was down 0.2 per cent to 35.250 per dollar before the rate review.

BLOOMBERG