Asia stocks muted as China-Vietnam tensions bubble

Associated Press

TOKYO (AP) — Shares were muted in Asia on Tuesday as tensions flared between China and Vietnam, while hopes for further monetary easing in Europe helped push Japan's benchmark to its highest level in seven weeks.

Vietnamese state media reported that a Chinese fishing vessel rammed and sank a Vietnamese fishing boat in the South China Sea, where the countries have overlapping territorial claims.

Tokyo's Nikkei 225 was up 0.2 percent by mid-afternoon at 14,633.26 after surging to its highest level since early April, tracking gains in Europe after European Central Bank President Mario Draghi suggested further stimulus may be needed to fend off growth-sapping deflation.

The release of data Tuesday showing resilient business conditions and rising producer prices also raised confidence in Japan's own recovery.

Trading elsewhere in Asia was lackluster. South Korea's Kospi fell 0.5 percent to 1,999.40 and Hong Kong's Hang Seng index slipped 0.2 percent to 22,917.92.

Shares gained in Taiwan, Malaysia and Australia but fell in Australia, New Zealand, Singapore and Shanghai.

With Thailand in the midst of a military coup and China at odds with Vietnam and other neighbors, investors are feeling cautious, said Linus Yip, a strategist at First Shanghai Securities in Hong Kong.

Investors were heartened Monday by the Standard & Poor's 500 finish last week above the 1,900 level for the first time, but watching to see what comes next after markets in the U.S. and Britain were closed for a long weekend.

In Europe, Germany's DAX rose 1.3 percent to close at 9,892.82 on Monday and France's CAC 40 gained 0.8 percent to 4,526.93.

In other markets, the euro was steady at $1.3656 from $1.3648 on Monday. The dollar was trading at 101.93 yen, versus its close of 101.91 yen.

In energy markets, oil prices rose. Benchmark crude for July delivery was up 13 cents to $104.48 in electronic trading on the New York Mercantile Exchange.