Asia stocks wobble as Japan politics, China’s rare-earth squeeze rattle nerves

Asian markets slipped Friday as a fresh chill in US–China economic ties and political uncertainty in Tokyo knocked risk appetite, while gold steadied near record territory and US stock futures found their footing.

MSCI’s gauge of Asia-Pac ex-Japan fell 0.4%. Hong Kong’s Hang Seng led declines, down 1.8%, and Australia’s ASX eased 0.1%. South Korea’s Kospi bucked the trend, up 1.4%, extending its run as the region’s standout. In Japan, the Nikkei dropped 1% after Thursday’s record close as the yen firmed about 0.2% and investors questioned whether prime-minister-in-waiting Sanae Takaichi can replicate Abenomics. A further blow: junior partner Komeito is set to leave the LDP-led ruling coalition, NHK reported.

“Today’s backdrop isn’t 2012 — no easy playbook for aggressive reflation,” Alpine Macro wrote, citing a more independent BOJ, lack of a firm parliamentary majority and voter pushback on inflation.

In China, stocks slid after Beijing widened export controls on rare earths, tightening its grip on a sector it dominates ahead of expected Trump–Xi talks. The CSI 300 fell 1.4%. Reports also pointed to tougher enforcement on chip-import restrictions aimed at cutting reliance on US tech.

Wall Street signals were steadier: S&P 500 e-minis inched up ~0.1% after Thursday’s dip, and the dollar index eased 0.1% near 99.37. The US 10-year Treasury yield hovered around 4.12%. Markets are still pricing a high chance — about 95% — of a 25 bp Fed cut on Oct. 29.

Commodities cooled after a torrid surge. Gold, which punched above $4,000 this week, steadied around $3,970 after a brief stumble; silver retested the $50 line. Brent crude slipped ~0.5% to ~$64.90 after Israel’s cabinet ratified a Gaza cease-fire, clearing the way for a pause in hostilities and a hostage release.

Despite Friday’s wobble, Asia is still on track for one of its best years in a decade, helped by booming AI-hardware demand and supply-chain shifts.

“Positioning remains light, and flows are only just returning,” said HSBC strategist Murat Ulgen — code for: the rally has room, but headline risk is running the show.

By the numbers

• Hang Seng: −1.8%

• Nikkei: −1.0%;

• TOPIX: −1.9%

• Kospi: +1.4%

• ASX 200: −0.1%

• CSI 300: −1.4%

• USD/JPY: ~152.7 (yen a touch firmer)

• Gold: ~$3,970;

• Silver: ~$49.9

• Brent: ~$64.9

• US 10-yr: ~4.12%

• S&P 500 futures: +0.1%

Reuters and CNBC contributed to this report.