China-Vietnam Tensions Quiet Asian Stocks

While hopes of lenient monetary policy continued to boost European shares, tensions blazed between China and Vietnam over a territorial dispute has muted the Asian stock markets on Tuesday.

Germany’s DAX rose 0.4 percent enlarging gains for the previous day sparked by Mario Draghi, European Central Bank president. He suggested further incentive may be needed to fend off growth-sapping deflation.

France’s CAC 40 was little changed at 4,527.72 while Britain’s FTSE 100 gained 0.5 percent. Shares in U.S. looked placed for a good start after the Memorial Day holiday.

Investors wait to see whether U.S. stocks can maintain momentum after the S&P 500 for the first time finished above 1,900 last week. Markets are also keeping a cautious observation on progress in Ukraine after Sunday’s presidential elections.

Russia accepting Petro Poroshenko, the billionaire businessman, as the next Ukrainian president raised hopes for an easing of tensions in the country. But pro-Russian rebels soared the Ukrainian clash by occupying a major airport in the country’s east and Kiev retaliated with an air strike hours after he was declared the victor.

Shares were mixed in Asia after Vietnamese state media reported that a Chinese fishing vessel smashed into and sank a Vietnamese fishing boat in the South China Sea, a point where the both China and Vietnam have overlie territorial claims.

China sending oil rig into seas near the disputed islands rocketed tensions this month.

Tokyo’s Nikkei 225 after surging earlier in the day closed up 0.2 percent – its highest level since early April.

The market data on Tuesday showed flexible business conditions and rise in producer prices, and the yen’s stability against the dollar, brought confidence back in Japan’s economic recovery.

South Korea’s Kospi fell 0.6 percent while Hong Kong’s Hang Seng index went down by 0.1 percent.

In Taiwan and Malaysia shares went up but fell in Australia, New Zealand, Singapore and Shanghai.

Investors are feeling cautious in the Asian marker with Thailand in the dealing a military coup while China at odds with Vietnam and other neighbors, said strategist at First Shanghai Securities in Hong Kong Linus Yip.

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