ASIA-PAC MARKET WRAP: Asia began the week subdued, with focus on FX amid post-election hangover

Asia equity markets began the week subdued as FX took much of the focus amid post-election hangovers from New Zealand and Germany elections over the weekend, where the incumbents in both won most votes but failed to get majorities, which moves the process on to coalition negotiations. ASX 200 (+0.1%) and Nikkei 225 (+0.4%) were positive with the latter the outperformer on JPY weakness, while a 4-month high Japanese Nikkei Manufacturing PMI and reports that PM Abe is considering a JPY 2tln economic package added to upbeat tone. Conversely, Chinese markets were subdued with Shanghai Comp. (-0.4%) and Hang Seng (-1.1%) negative, as property names suffered from tighter restriction announcements, although the losses in the mainland were stemmed following a firm liquidity operation heading into next week’s National Day holidays. Finally, 10yr JGBs were relatively flat as pressure in the safe-haven from a positive risk sentiment in Japan, was counterbalanced by the BoJ’s presence in the market for a respectable amount just shy of JPY1trl in JGBs with 1yr-10yr maturities.

Election results were the main catalysts for FX, in which EUR/USD was pressured and tested the 1.1900 level to the downside after the German election results showed Chancellor Merkel is set for a 4th term, but at a weaker position and in need of coalition partners. This was after her CDU/CSU won the most votes but performed weaker than expected and with outgoing coalition partner SPD to become the main opposition party, while the results also showed support for AfD surged which makes it the 3rd largest party and the first far-right party to be represented in Parliament for 60 years. Elsewhere, NZD/USD also suffered from political uncertainty after New Zealand’s incumbent National Party won most seats but failed to secure a majority as anticipated. This places the next government at the hands of New Zealand First Party’s leader and effective ‘kingmaker’ Winston Peters, who is all too familiar with this obligation having supported both the National Party and main opposition Labour in past governments.

25 Sep 2017 - 05:48- Important- Source: RANsquawk

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