Asian shares face weekly losses, sterling steadies as Brexit risk seen ebbing

Asian shares rose on Friday, but were set for weekly losses as investors favoured safe haven assets due to fears that Britain will vote to quit the European Union, though the killing of a pro-EU lawmaker was seen swaying sentiment toward the "Remain" camp.

Campaigning for Thursday’s referendum, which overshadowed this week’s US and Japanese central bank meetings, was temporarily halted after a British member of parliament, Jo Cox, was shot and fatally wounded on Thursday.

The recently volatile pound rose 0.4 percent to $1.4255 with analysts noting the pro-membership MP’s death could generate sentiment in favour of remaining in the EU. MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.8 per cent, but was down nearly 2.5 per cent for the week.

China’s CSI 300 index advanced 0.9 per cent, and the Shanghai Composite added 0.7 per cent. That helped them shrink losses for the week to 1.3 per cent and 1.2 per cent respectively. Hong Kong’s Hang Seng gained 0.8 per cent, but is set for a weekly decline of 4 per cent.

Wall Street marked gains overnight, with the benchmark S&P 500 index erasing sharp intra-day losses to snap a five-day losing streak. “Investors are considering the risk of Brexit to have been lowered, both by reports that European hedge funds believe Brexit will not get up and, secondly, that the shooting (of Cox) has played against the Brexit vote,” said Angus Gluskie, managing director of White Funds Management in Sydney.

Japan’s Nikkei stock index gained 1.6 per cent, taking back some of its steep losses. But Japanese shares were still poised to shed 5.5 per cent in a week in which the safe-haven yen soared after the Bank of Japan decided against delivering additional stimulus to counter waning inflation and weak global growth. “Continued inaction by the BOJ in the face of these risks only reinforces the

market’s suspicions that the central bank is running out of policy options, feeding back into a stronger yen,” HSBC economist Izumi Devalier said in a note. Japanese Finance Minister Taro Aso said on Friday that he was deeply concerned about “one-sided, rapid and speculative moves” seen in the currency market and would respond if necessary to ensure stability in currencies.

The dollar clawed back some lost ground on Friday, rising 0.3 per cent to 104.57 yen, but it was still down 2.2 per cent for a week in which it dropped as low as 103.555. That was its deepest nadir since August 2014. The dollar index, which tracks the greenback against a basket of six major peers, also slipped 0.2 percent, and is also set for a weekly decline of the same magnitude. The euro added 0.7 per cent to 117.845 yen, but was still down more than 2 per cent for the week.

On Thursday, it plumbed a three-year low of 115.51. The Federal Reserve also stood pat on policy on Wednesday, though it signalled it still planned to raise rates twice in 2016. But it also downgraded its economic view, and said slower growth would stem the pace of future monetary policy tightening. Crude oil prices rose for the first time in seven days as Brexit concerns ebbed, after losses of almost 4 percent overnight.

US crude rose 0.7 per cent to $46.52 a barrel, and Brent crude climbed 1 percent to $47.66. Both recorded losses of about 10 per cent over the previous six sessions. Gold advanced 0.1 per cent to $1,279.70 an ounce following wild swings overnight. Spot gold surged to a near-two-year high of $1,315.55, but closed down 2.8 per cent from that level as markets bet on growing support for Britain to remain in the EU. It is set for a gain of 0.5 per cent for the week.

Reuters