Investing.com—Asian Stocks Rangebound Amid Currency Woes

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 for this weekend.

Sentiment towards Japan was also rattled by repeated warnings on potential currency market intervention from 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 in 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 secure enough votes and may need to form alliances with smaller, regional parties. Such a scenario could complicate Prime Minister Shigeru Ishiba's ability to implement economic and monetary policy reforms, leading to increased uncertainty over the Japanese economy.

Political uncertainty clouds the monetary outlook for the Bank of Japan, which is widely expected to keep interest rates steady next week. Investors also doubt how much headroom the BOJ will have for further rate increases, 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 resulted in the yen retreating on Friday, keeping traders on edge regarding potential government intervention, especially following recent verbal warnings from officials.

Asian Markets Muted, Set for Weekly Declines

Broader Asian markets remained within a tight range on Friday as uncertainty over the U.S. presidential election and interest rates kept sentiment subdued. Most regional markets aimed 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 about 1% this week.

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

Hong Kong’s Hang Seng index was the best performer for the day, rising around 1%, though it was set for a third straight week of losses.

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, with a range of mixed earnings and foreign capital outflows resulting in a nearly 2% loss this week – marking the fourth consecutive week of losses.