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Most Asian markets rise as Brexit worries ease, pound climbs

CNBC CNBC 20/06/2016 Saheli Roy Choudhury
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Asia markets were mostly higher while the pound rose on Monday, amid easing Brexit concerns after several weekend polls showed the remain camp regained momentum ahead of a referendum vote to decide the U.K.'s future within the European Union (EU).

Australia's ASX 200 (.AXJO) advanced 1.11 percent in early trade, with a 1.67 percent increase in the financials sub-index, which accounts for nearly half of the broader index. The energy and materials sub-indexes also advanced 3.77 and 1.1 percent respectively.

The benchmark Nikkei 225 (.N225) was up 2.21 percent as a relatively weaker yen took some pressure off stocks and investors ignored news of a more than 11 percent drop in Japanese exports for the month of May. Across the Korean Strait, the Kospi (.KS11) gained 1.18 percent. In Hong Kong, the Hang Seng index (.HSI) added 0.76 percent.

Bucking the trend were the Chinese mainland markets, with the Shanghai (.SSEC) composite down 0.45 percent and the Shenzhen (.DJSZ) composite off by 0.53 percent.

Chris Weston, chief market strategist at spreadbettor IG, said risk appetite had increased after weekend polls showed momentum in favor of the remain camp in the Brexit referendum.

"Volumes through the equity market will be key today, as this will detail whether any buying has genuine backbone or whether this is more a position adjustment," Weston said.

Britons will head to the polls on June 23 to vote to decide if the U.K. should leave or stay within the 28-member EU trade bloc. If the leave camp won, the process of negotiating a British exit from the EU would begin, but talks could take more than two years.

Public opinion appeared to have slightly tilted in favor of the remain camp, according to several polls over the weekend.

A YouGov poll for The Sunday Times newspaper published at the weekend showed support for the remain camp had taken a narrow 44 percent against 43 percent lead over the leave campaign, based on polling conducted on Thursday and Friday.

Last week, a series of opinion polls showed public opinion was divided, with the leave camp holding a slight upper-hand. Campaigning for Brexit was then halted on Thursday after a pro-EU British lawmaker, Jo Cox, was killed while meeting with constituents. A 52-year-old man, Thomas Mair, was charged with her murder.

The International Monetary Fund warned on Friday of "negative and substantial" net economic effects should the U.K. choose to leave.

The British pound (GBPUSD=) strengthened after some Brexit concerns eased; the pound traded at $1.4584 as of 10:44 a.m. HK/SIN on Monday, compared to levels around $1.40 on Thursday.

The dollar pulled back against a basket of currencies, with the dollar index (=USD) trading at 93.589 Monday morning Asia time, compared to levels near 95.300 that it touched late last week.

Meanwhile, the Japanese yen (OSEJPY=), considered a safe-haven asset, traded at 104.66 against the dollar, after pushing as high as 103.58 following the Bank of Japan (8301.T-JP)'s decision to stand pat on monetary policy on Thursday.

Major export stocks received a boost from the relative weakness in the yen, with shares of Toyota (7203.T-JP) up 2.58 percent, Nissan (7201.T-JP) up 2.67 percent and Sony (6758.T-JP) higher by 3.33 percent.

Major yen crosses also traded higher, with the euro/yen (EURJPY=) at 118.82, from levels near 115.46 on Thursday. The pound/yen (GBPJPY=) was up 152.61, compared to around 149.00 late last week.

"The BOJ has been keeping its power dry for the Brexit fallout," said Stephen Innes, a senior foreign exchange trader at OANDA, adding intervention will likely happen if the dollar/yen reaches the 100 handle as it would be perceived to be "unrelated to actual Japanese fundamentals."

Some of the impact of the yen's strength was felt in Japan's trade numbers, released before market open. Exports declined 11.3 percent on-year in May according to the Ministry of Finance data, versus a Reuters' median estimate for a 10.4 percent annual fall.

Oil prices advanced during Asian hours, with global benchmark Brent up 0.67 percent at $49.50 a barrel as of 10:46 a.m. HK/SIN, while U.S. crude added 0.9 percent to $48.41. Energy plays in the region were positive, with Santos (STO-AU) shares advancing 6.76 percent, Woodside Petroleum (WPL-AU) up 4.7 percent and Inpex (1605.T-JP) up 3.71 percent.

Spot gold (XAU=), another safe-haven asset, fell some 1.16 percent to $1,283 an ounce on the back of easing Brexit concerns. Gold miners in Australia traded lower, with Newcrest (NCM-AU) shares down 3.57 percent and Evolution Mining (EVN-AU) down 2.97 percent.

In company news, electronics giant Samsung said power supply to its China memory chip plant was disrupted on June 18 due to an outage, affecting a part of the production capacity at the facility, according to Reuters. The disruption affected less than 10,000 memory chip wafers at the plant, Reuters reported.

Investors appeared unconcerned over the news, with Samsung Electronics (593'A-KR) shares trading up 0.63 percent on Monday morning.

U.S. stocks closed lower Friday, with the Dow Jones industrial average (.DJI) down 57.94 points, or 0.33 percent, at 17,675.16; the S&P 500 (.SPX) index finished 6.77 points lower, or 0.33 percent, at 2,071.22. The Nasdaq (.IXIC) composite ended down 44.58 points, or 0.92 percent, at 4,800.34.

The major U.S. indexes lost more than 1 percent each for the week amid global uncertainties.

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