Asia stocks muted; Japan shares dip amid election, yen risks

Most Asian stocks were rangebound on Friday amid a dearth of immediate trading cues, while Japanese shares sank in anticipation of a hotly contested general election set to take place this weekend. 

Sentiment towards Japan was also rattled by repeated warnings on potential currency market intervention by the government, as the yen neared three-month lows. Soft inflation data pressured the yen on Friday. 

Regional markets took middling cues from a mildly positive overnight close on Wall Street, with U.S. stocks still nursing losses for the week. U.S. stock index futures steadied in Asian trade as focus turned to a barrage of megacap technology earnings due next week.  Japan’s Nikkei slides on election, yen jitters 

The Nikkei 225 slid 1.1% to a three-week low, while the TOPIX lost 0.8% as investors turned wary of Japanese markets before a general election this Sunday. Japanese indexes were also the worst performers in Asia this week, losing about 3% each. 

Polls from local media outlets show Japan’s ruling coalition, led by the Liberal Democratic Party, may not be able to win enough votes, and will potentially have to seek alliances with smaller, regional parties.

Such a scenario is likely to make it tougher for Prime Minister Shigeru Ishiba to enact economic and monetary policy reforms, sparking more uncertainty over the Japanese economy. 

Political uncertainty also clouds the monetary policy outlook for the Bank of Japan, which is widely expected to keep interest rates steady next week. Investors also doubt just how much headroom the BOJ will have to keep raising interest rates, given recent signs of weakness in the Japanese economy.

Consumer inflation data from Tokyo showed inflation fell below the BOJ’s annual 2% target in October. The soft inflation reading saw the yen retreat on Friday, which kept traders on edge over any potential intervention by the government, especially following verbal warnings from officials this week.  Asian markets muted, head for weekly declines

Broader Asian markets kept to a tight range on Friday, as uncertainty over the U.S. presidential election and interest rates kept sentiment subdued. Most regional markets were also set for weekly declines. 

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes rose slightly after the People's Bank left its one-year policy rate unchanged. Both indexes were down around 1% this week. 

A meeting of China’s National People’s Congress, which was set to offer more cues on fiscal stimulus, appeared to be delayed to November. 

Hong Kong’s Hang Seng index was the best performer for the day, rising around 1%, although it was set for a third straight weekly loss. 

Australia’s ASX 200 rose 0.3%, as did South Korea’s KOSPI . 

Futures for India’s Nifty 50 index pointed to a muted open. A swathe of mixed earnings and foreign capital outflows saw the Nifty nursing a nearly 2% loss this week- its fourth straight week of losses.

Source: Investing.com