Hang Seng dips on report Hong Kong leader may be replaced
Asian markets retreated in early trading Wednesday amid new uncertainty involving Brexit and Hong Kong.
On Tuesday, British Prime Minister Boris Johnson won Parliament’s backing for the substance of his exit deal but lost a key vote on its timing, a result that inches him closer to his goal of leading his country out of the European Union — but effectively guarantees it won’t happen on the scheduled date of Oct. 31. The votes plunge the tortuous Brexit process back into grimly familiar territory: acrimonious uncertainty.
Late Tuesday, the Financial Times reported that China is preparing plans to replace embattled Hong Kong administrator Carrie Lam, whose government has been the subjects of massive pro-democracy protests for five months. The report said a new administrator could be in place by March.
Hong Kong’s Hang Seng Index HSI, -0.82% fell 1%, while the Shanghai Composite SHCOMP, -0.43% and Shenzhen Composite 399106, -0.79% dropped about 0.3% each. Japan’s Nikkei NIK, +0.34% was about flat while South Korea’s Kospi 180721, -0.39% slipped 0.6%. Benchmark indexes in Taiwan Y9999, -0.28% , Singapore STI, -0.52% and Indonesia JAKIDX, +0.52% dipped, but stocks rose slightly in Malaysia FBMKLCI, -0.34% . Australia’s S&P/ASX 200 XJO, +0.01% declined 0.2%.
Among individual stocks, SoftBank 9984, -2.51% fell in Tokyo trading after announcing a deal to take over WeWork, offering the beleaguered startup a $5 billion lifeline. Rakuten 4755, -2.26% and Sony 6758, -1.63% also declined. In Hong Kong, tech companies AAC 2018, -3.59% and Tencent 700, -2.32% dropped, along with oil producer CNOOC 883, -0.34% . Apple component maker LG Display 034220, -2.07% and chip maker SK Hynix 000660, -1.77% sank in South Korea. Beach Energy BPT, -0.43% and National Australia Bank NAB, -0.48% declined in Australia.
Earlier, U.S. shares retreated, led by a tech sell-off, as investors weighed mixed earnings from McDonald’s, Procter & Gamble and other big companies. That blunted investor optimism that had been fed by hopes for progress in settling a damaging U.S.-Chinese tariff war.
“Alongside Brexit, the relatively mixed set of earnings out of the US overnight provides poor leads for Asia markets,” said Jingyi Pan of IG in a report.
More results from Boeing BA, +1.42% , Caterpillar CAT, -0.38% and other industrial names due Wednesday “could cap the gains for the S&P 500 index,” said Pan.
On Wall Street, the benchmark S&P 500 index SPX, +0.11% fell 0.4% to 2,995.99. The Dow Jones Industrial Average DJIA, +0.15% dropped 0.2% to 26,788.10. The Nasdaq COMP, +0.03% , which is heavily weighted with technology stocks, bore the brunt of the selling, losing 0.7% to 8,104.30.
Investors have been shifting their focus to corporate earnings reports as they wait for developments in U.S.-Chinese trade negotiations. Investors were optimistic after President Donald Trump agreed to postpone a planned tariff hike following the latest talks in Washington. That helped the S&P 500 to turn in gains for the past two weeks.
Analysts came into this latest earnings season expecting profits to decline overall for companies in the S&P 500. But with about 15% of companies in the index reporting so far, results have been unexpectedly positive.
Earnings growth fell slightly in the first and second quarters, according to data from FactSet, which was better than Wall Street’s expectation at the start of those reporting seasons.
A few large companies disappointed investors Tuesday. McDonald’s MCD, -0.17% slid 5% after reporting that third-quarter profit and revenue fell short of forecasts. It was one of the big decliners among companies that rely on consumer spending. Travelers TRV, +1.98% led the financial sector slide. The insurance company sank 8.3% after it reported lower-than-expected earnings.
Benchmark U.S. crude CLX19, +1.69% lost 41 cents to $54.07 per barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.97 on Tuesday to close at $54.48. Brent crude CLZ19, +1.45% , used to price international oils, retreated 32 cents to $59.39 per barrel in London. It rose $1.74 the previous session to $59.70.
The dollar USDJPY, +0.15% declined to 108.30 yen from Tuesday’s 108.46 yen.