TOKYO: Asian markets traded mostly lower on Wednesday, following a modest finish in U.S. stocks, but the energy sector got a boost after oil settled above $50 a barrel on Tuesday for the first time in nearly 11 months.
The Nikkei 225 traded down 0.32 percent, with Japanese stocks under pressure from fresh yen strength against the dollar. The currency pair traded at 106.80 as of 10:21 a.m. HK/SIN, compared with levels near 107.9 in the previous session. Across the Korean Strait, the Kospi advanced 0.17 percent.
Stephen Innes, senior trader at Oanda Asia Pacific, attributed the dollar-yen’s fall to the prospects of lower-for-longer U.S. interest rates and uncertainty over the Bank of Japan’s next likely move at its policy meeting later this month. In a note Wednesday, he also said that Japan’s policymakers appear to be showing a “lack of urgency,” with Prime Minister Shinzo Abe only planning to propose an economic stimulus package in the autumn, after July elections.
Chinese mainland markets traded lower, with the Shanghai composite down 0.55 percent, and the Shenzhen composite off by 0.73 percent. In Hong Kong, the Hang Seng index was down 0.44 percent.
In Australia, the ASX 200 fell 0.26 percent, with a 0.38 percent decline in the financials sub-index, which accounts for nearly half of the broader index. Major banking stocks fell, with shares of ANZ down 0.88 percent, Commonwealth Bank of Australia off by 0.61 percent, Westpac lower by 0.1 percent and NAB down 0.79 percent.
Oil prices advanced overnight on expectations of stockpile drawdowns in the U.S. and global supply shortfalls. Reuters said a report from the American Petroleum Institute, released after prices settled, showed a higher-than-expected crude drawdown of 3.6 million barrels.
During Asian hours, U.S. crude futures were nearly flat at $50.38, after settling up 1.4 percent on Tuesday. Global benchmark Brent was also flat at $51.41, following a 1.8 percent increase overnight.
Energy plays in the region were higher, with Santos shares up 2.71 percent, Oil Search higher by 1.76 percent and Japan Petroleum up 0.96 percent. Chinese mainland oil stocks were mostly positive, with Sinopec shares up 0.32 percent.
In the currency market, the dollar traded at 93.749 against a basket of currencies as of 10:29 a.m. HK/SIN, down from levels above 95 on Friday, after a disappointing U.S. jobs report drastically reduced chances of an interest rate hike from the U.S. Federal Reserve in June. The greenback had a muted reaction to a speech that Fed chair Janet Yellen gave on Monday, where she insisted that the Fed needed to raise rates, but stepped back from giving a time frame.
“Now that Yellen’s speech is behind us, there are no major U.S. economic reports scheduled for release this week so the drop in yields, new year-to-date high in the S&P and falling expectations for a July rate hike fueled the follow through selling [in the dollar],” said Kathy Lien, managing director of foreign exchange strategy at BK Asset Management.
Major U.S. indexes closed mixed, with the Dow Jones industrial average up 17.95 points, 0.1 percent, at 17,938.28. The S&P 500 added 2.72 points, 0.13 percent, to 2,112.13 and the Nasdaq composite was lower by 6.96 points, or 0.14 percent, at 4,961.75.
Wednesday is also a data-heavy session.
The value of Australia’s home loans for investment finance in April fell 5 percent from March, but owner-occupied finance rose 1.7 percent on-month on a seasonally adjusted basis, below a Reuters poll forecast for a 2.5 percent rise, data released during the session showed.
Chinese trade data due mid-morning. Before market open, Japan’s revised first quarter gross domestic product numbers showed the economy expanded at a 1.9 percent annualized rate, up from the preliminary reading of 1.7 percent, reported Reuters.
Chris Weston, chief market strategist at IG, said it was unclear how much of an impact the data would have on financial markets.
“We are seeing a predominantly macro-driven market and the key themes really affecting sentiment are the U.K. referendum, Fed monetary policy and effectively where-to for the dollar and yuan,” he said, adding, “The market will likely pay most focus to the China trade data, which is expected to show an increase in the surplus to $55 billion, helped by a lesser fall in exports relative to imports.”
In South Korea, the finance minister said on Wednesday the government and the Bank of Korea will create an 11 trillion won ($9.50 billion) fund to support two state-run banks most exposed to the shipping and shipbuilding firms currently being restructured, reported Reuters.
Shares of shipbuilders traded lower. Hyundai Heavy Industries shares were down 0.44 percent, Samsung Heavy Industries off by 1.47 percent and Daewoo Shipbuilding & Marine Engineering down 1.33 percent.
Trinh D. Nguyen, a senior economist for emerging Asia at Natixis, said of the announcement, “The [South Korean] economy needs help. Shipbuilders and their lenders are most impacted by a subdued global trade cycle. While this is not a Korean-specific story, this is no respite as their real debt is rising as orders wane. And their under-performance is impacting other sectors, such as banking.”
