ASIA-PAC MARKET WRAP: Asia in the red as region digests indecisive Italian election, weak Chinese PMI data and as trade war concerns lingered

Asia equity markets began a risk-packed week with a downbeat tone as region digested Italian elections, China economic announcements and continued trade war concerns. Overnight focus was dominated by the elections in Italy which is headed for a hung parliament with no side on track for a majority. The anti-establishment 5-Star Movement are projected to emerge as the largest single party and the Centre-Right bloc as the leading coalition, but with far-right junior coalition partner Northern League having possibly outperformed Berlusconi’s Forza Italia. This ongoing political uncertainty and rise of the Euro sceptics dampened the risk tone with ASX 200 (-0.6%) and Nikkei 225 (-1.0%) negative throughout the session, while Japanese steel names and automakers remained pressured on lingering tariff/trade war concerns. Elsewhere, Hang Seng (-1.2%) underperformed and Shanghai Comp. (-0.1%) initially bucked the trend as participants contemplated over China’s economic work report in which the official GDP growth target was maintained at 6.5% as widely expected, before disappointing Chinese Caixin Services and Composite PMI data eventually weighed on the mainland. Finally, 10yr JGBs were higher and reclaimed the 151.00 level, amid a rebound in Tnotes and a flight-to-quality due to the subdued risk tone.