Asian markets end mostly up, eyes turn to US inflation

The yen has risen on concerns about Japan's Prime Minister Shinzo Abe and his Finance Minister Taro Aso, who have been embroiled in a land deal scandal AFP/KAZUHIRO NOGI

A strong jobs report on Friday and Donald Trump's decision to meet Kim Jong Un helped fuel a surge in global equities at the end of last week, overshadowing US tariffs and fears of a trade war.

But concerns returned following comments from a European trade commissioner that the EU would "stand up to bullies" while Trump said he will look into cutting levies the bloc imposes on US goods.

The Dow and S&P 500 each fell, though the Nasdaq ticked up to another record high.

Attention is now on the inflation release later in the day, which will be pored over for an idea about the Federal Reserve's timetable for hiking interest rates.

A strong reading could hit markets worried about the impact of higher borrowing costs on the investment environment.

"Equity investors are finding it difficult to ignore the gnawing concerns about trade wars and are adopting a defence first strategy despite the (positive) jobs number," said Stephen Innes, head of Asia-Pacific trade at OANDA.

"Keep in mind the spotlight will be on US (consumer inflation) tonight, and it was only one month ago a surprise inflation print sent the market into a tailspin, so likely some caution ahead of the critical US inflation data. Overall investors remain very cautious as sentiment recovers."

YEN STRENGTH

Asian markets swung in and out of positive territory through the morning and by the end Tokyo was up 0.7 per cent.

Hong Kong ended marginally higher while Shanghai finished 0.5 per cent lower.

Seoul added 0.4 per cent and Singapore put on 0.4 per cent but Sydney slipped 0.4 per cent. Wellington and Taipei were both higher, while Manila, Bangkok and Jakarta fell.

"We need to brace ourselves for a possible impact in case that (inflation) turns out to be higher than expected," forex strategists at Mizuho Securities said in a commentary.

The dollar edged up but was still struggling against the yen as traders fret about the political future of Japanese Prime Minister Shinzo Abe and Finance Minister Taro Aso, who have both been sucked into a land deal scandal.

The controversy comes as dealers eye a wind-down of Japan's crisis-era stimulus programme, which is expected to put upward pressure on the yen, with some commentators saying the greenback could fall below 100 yen for the first time since 2016.

"The theme for 2018 is the risk of the dollar-yen breaking 100," said Masashi Murata, a currency strategist at Brown Brothers Harriman in Tokyo.

The yen above that level "wouldn't look excessive from the perspective of its fundamentals", he told Bloomberg News.

In early European trade London was flat, Paris rose 0.2 per cent and Frankfurt gained 0.1 per cent.

- Key figures around 0820 GMT -

Tokyo - Nikkei 225: DOWN 0.7 per cent at 21,968.10 (close)

Hong Kong - Hang Seng: FLAT at 31,601.45 (close)

London - FTSE 100: FLAT at 7,215.04

Euro/dollar: DOWN at US$1.2331 from US$1.2335 at 2040 GMT

Pound/dollar: DOWN at US$1.3892 from US$1.3905

Dollar/yen: UP at ¥106.92 from ¥106.40

Oil - West Texas Intermediate: DOWN 16 cents at US$61.20 per barrel

Oil - Brent North Sea: DOWN 15 cents at US$64.80 per barrel

New York - Dow: DOWN 0.6 per cent at 25,178.61 (close)