Asian shares subdued after Bannon departure as US-South Korea military drills begin

Asia markets were mixed in Monday trade as investors digested political developments in Washington while U.S.-South Korea joint military drills kicked off.

Japan’s Nikkei 225 slid 0.37 percent as gains in oil stocks were offset by softness in most automakers, financials and technology names. The benchmark index had fallen to its lowest levels in more than three and a half months earlier in the session.

Across the Korean strait, the Kospi was off 0.09 percent as U.S.-South Korea military exercises began.

The joint military drills, which will take place from Aug. 21 to Aug. 31, come on the back of a ramp up in geopolitical tensions earlier this month after a heated exchange of rhetoric between President Donald Trump and Pyongyang.

Down Under, the S&P/ASX 200 declined 0.77 percent, with weakness in the health care and telecommunication services sub-indexes leading losses. The heavily-weighted financials sub-index traded lower by 0.97 percent. Greater China markets bucked the downward trend to climb higher. Hong Kong’s Hang Seng Index gained 0.52 percent. On the mainland, the Shanghai Composite advanced 0.24 percent and the Shenzhen Composite rose 0.416 percent.

Steve Bannon on Friday became the latest high-ranking official to leave the White House when he vacated the role of President Donald Trump’s chief strategist.

Media reports said Bannon’s resignation had been submitted earlier in August, but its announcement had been pushed back due to violence from a white nationalist rally in Charlottesville, Virginia.

While the ouster resulted in a positive reaction in risk assets — major U.S. indexes had fallen sharply last Thursday on rumors that National Economic Council Director Gary Cohn could leave — it will only have a short-lived impact on markets, one expert said.

“From a market perspective … Bannon’s departure doesn’t change Trump’s strong views on immigration, border security and trade protection,” National Australia Bank currency strategist Rodrigo Catril said in a Monday note.

On Wall Street, stocks closed above session lows on Friday after news of Bannon’s departure, with the Dow Jones industrial average declining 0.35 percent, or 76.22 points, to close at 21,674.51.

Trump’s administration has had a choppy past few weeks, which culminated in the disbanding of two advisory councils comprised of top business executives. Several business leaders from those bodies had resigned before the official dissolution due to the president’s response to Charlottesville.

Ahead, markets will await the Federal Reserve’s Jackson Hole symposium beginning August 24 for potential clues on the central bank’s monetary policy plans. European Central Bank President Mario Draghi will be in attendance, but Reuters reported last week that he would not be disclosing new ECB plans during his speech.

In corporate news, there’s interest in telecommunications operator China Unicom, which announced Sunday it would raise $11.7 billion in funds as part of mixed ownership reform plans, Reuters reported. $9.25 billion of those funds would come from a private placement.

Media reports highlighted confusion over details in China Unicom’s initial press release last week, which was subsequently withdrawn from the Shanghai Stock Exchange. Shares of the telco’s Hong Kong-listed unit resumed trade on Monday and soared 8.21 percent.

On the earnings front, Australia’s Fortescue Metals Group said Monday that net profit rose 113 percent to $2.09 billion for the year ended June 30, 2017. Fortescue shares jumped 6.45 percent after the miner announced a larger dividend than expected.

Other market movers included Australian steel company Bluescope, which saw its stock tumble 20.40 percent after the company highlighted a weaker outlook for earnings due to competition and lower U.S. margins.

Oil prices were mostly unchanged after rising more than 3 percent on Friday on weakness in the dollar and a drop in U.S. oil rigs. Global benchmark Brent crude futures slid 0.11 percent to trade at $52.66 a barrel and U.S. crude was flat at $48.51.

In currencies, the dollar index, which measures the U.S. currency against a basket of currencies, stood at 93.468 at 12:10 p.m. HK/SIN. Against the yen, the greenback edged up to fetch 109.23 yen compared to levels around 109.17 seen last Friday, but it remained below the 110 handle seen at the beginning of last week.

“White House politics will remain in play, but given some of the outsized currency moves of late, it’s not too surprising dealers are paring short dollar risk as the shift to the Jackson Hole summit will put the focus back on central bank watch,” OANDA head of APAC trading Stephen Innes said in a Monday note.

The board of governors of Bank Indonesia, the country’s central bank, will also begin its monthly two-day meeting Monday.

Source: CNBC