Japanese shares got a boost Tuesday from a weaker yen but some other key Asian markets drifted lower on geopolitical concerns, with lower iron ore prices dragging on mining stocks in Sydney.
Tensions on the Korean peninsula have been weighing on sentiment, with concerns North Korea may soon build a nuclear-tipped missile that could reach the US.
US Vice President Mike Pence reiterated his country’s commitment to the security of Japan on a visit to Tokyo Tuesday, as North Korea vowed to launch missile tests “every week” — ramping up fears over its weapons programme.
In an interview with the BBC, the nuclear-armed North also threatened “all-out war” if the US took any action against it.
“One suspects the concerns in North Korea have further to play out,” said IG market strategist Chris Weston, citing worries of further missile testing in the near term.
Hong Kong was down more than one percent after a two-day holiday, while Shanghai closed down 0.8 percent despite positive Chinese GDP growth data released Monday.
Sydney slumped 0.9 percent in post-holiday trade, with the nervous mood fuelled by weaker iron ore prices according to Ric Spooner, Sydney-based chief analyst at CMC Markets Asia.
Among those hit were Fortescue Metals Group, which gave up 7.5 percent, BHP Biliton, which fell 1.6 percent and Rio Tinto, which lost 1.9 percent.
But Tokyo stocks closed up 0.4 percent as the yen fell against the dollar, following reported remarks by US Treasury Secretary Steven Mnuchin that US tax reform is still scheduled for 2017 and that a strong dollar is good in the long run.
The dollar rose to 108.95 yen Tuesday from rates in the mid-108 yen range before news on Mnuchin’s remarks.
A weak yen is positive for Japanese exporters as it inflates their repatriated profits.
Seoul was also up, along with Jakarta, Singapore and Kuala Lumpur.
Spooner hinted that the retreat of the safe-haven yen may be a sign that geopolitical concerns are starting to ease.
“Gold and the Japanese yen have both weakened a little in Asian trading, suggesting that markets are taking a wait-and-see attitude towards geopolitical risk and the situation in North Korea,” he said.
In early European trade, London was down 0.4 percent, Paris was flat and Frankfurt added 0.4 percent.