HONG KONG (AFP): Asian markets were mixed on Tuesday following an upbeat session on Wall Street as investors look to crucial midterm elections that polls show could upend power in Washington.
Shares ended lower in Hong Kong and Shanghai as speculation about a rollback of China’s strict zero-Covid policies fuelled market volatility, even after the government vowed to stick with its harsh lockdowns and testing regimes.
But Tokyo stocks closed 1.3 percent higher, extending rallies in New York, where the dollar also retreated against the pound and the euro.
Early voting has begun in many states and most US voters go to the polls on Tuesday, with a Republican takeover of Congress likely dooming President Joe Biden’s ambitious proposals.
Polls show Republicans are likely to win at least one house of Congress — and some see the prospect of further Washington gridlock as a scenario that lessens the risk of policy uncertainty.
“This may very well be taken as a positive for equity markets over coming days,” Clifford Bennett, chief economist at ACY Securities, said in a note.
“The Biden administration, while welcomed to office by financial markets, has nonetheless delivered on being a very big spending government,” Bennett wrote.
“It is difficult to argue the extreme inflation and slowing economy are entirely the Biden administration’s fault, but voters will be very clear in their feelings on the matter just the same.”
On Monday, US stocks climbed, with the Dow Jones Industrial Average finishing up 1.3 percent and the broad-based S&P 500 rising 1.0 percent.
The next major data point that investors are watching is US inflation data due on Thursday, “which will be the next marker for the (Federal Reserve) on how high to take interest rates”, said Stephen Innes of SPI Asset Management.
Before the US Consumer Price Index data is released, “traders are unlikely to live bullish life to the fullest”, he predicted.
Seoul gained 1.1 percent, Taipei rose 0.9 percent and Sydney was up 0.4 percent, with Singapore rising 0.3 percent.
But Hong Kong closed down 0.2 percent after jumping nearly three percent in the previous session as investors continued to hope for a relaxation of China’s strict Covid-19 rules.
“Speculation about reopening continues to add some market volatility,” said Taylor Nugent, an economist at National Australia Bank.
“In a timely reminder of the potential for Covid policy to hit output, Apple warned iPhone shipments will be lower than previously expected after China lockdowns affected operations at a supplier’s factory,” he noted.
Shanghai closed down 0.4 percent, while Jakarta fell 0.7 percent and Wellington dropped 1.2 percent.
European shares also fell in early trade. London was down 0.5 percent, Paris fell 0.4 percent and Frankfurt lost 0.1 percent.