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Oil declines weigh on Asia markets, but Japan shares rise

Dominic Lorrimer | Getty Images

Asian markets traded mostly lower Wednesday, with losses in energy plays amid fresh oil-price declines counterbalanced by gains in Japan shares as traders hoped for more stimulus from the central bank.

Traders around the region were likelyhesitant ahead of the U.S. Federal Reserve meeting set to end on Thursday. Markets have been jumpy in recent months, awaiting the Fed's first interest rate hike in nine years. While most analysts don't expect that hike to come at this meeting, they'll be parsing the Fed's statement for cues on when it will move.

Oil shares around the region lost ground after crude oil futures settled at a two-month low of $43.20 a barrel, down 78 cents, in U.S. trade overnight. In Asia trade midday, WTI edged up 7 cents to $43.27. Japan's Inpex shed 0.4 percent. In Hong Kong, CNOOC shed 1.95 percent and Sinopec fell 1.4 percent.

In Australia, major resources plays dropped sharply. BHP fell 2.3 percent, AWE lost 2.9 percent, LNG lost 6.1 percent and Woodside shed 2.2 percent.

Jeff Powell, chief investment officer at Polaris Greystone Financial, blamed much of oil's decline on OPEC's failure to cut production.

"You've also seen a lot of efficiencies created as oil has dropped within the fracking segment of the U.S. market, so a lot of the production that's going on in the U.S. really hasn't slowed down even though you have seen this material drop in oil price," Powell told CNBC.

However, he said that it was possible oil prices were bottoming, noting that he was "dabbling" in energy shares.

Amid the declines in resources plays, the S&P ASX 200 index ended down 0.2 percent, retracing some early losses after benign inflation data raised the possibility the Reserve Bank of Australia may cut interest rates at its meeting next week. Third-quarter consumer prices rose 0.3 percent, less than the Reuters forecast for a 0.5 percent rise. That decked the Australian dollar, which fell as low as $0.7116 after the data from around $0.7192 before the data.

Helping to buoy the index, heavyweight Telstra rose 1.1 percent and Westpac gained 0.5 percent.

Japan shares ended higher, with the Nikkei index tacking on 0.67 percent.

Traders there are likely to be hesitant as they await the outcome of the Bank of Japan's meeting at the end of the week. Many analysts expect the central bank to introduce further stimulus, which is likely to boost asset prices.

Symbol
Name
Price
 
Change
%Change
NIKKEI
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HSI
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ASX 200
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SHANGHAI
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KOSPI
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CNBC 100
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"There is a strong case for more QE at the 30th October meeting; the economy is stagnating and the target measure of inflation is below zero," Oxford Economics said in a note Tuesday.

"We expect a 20 trillion yen lift to annual asset purchases, taking the rate to 100 trillion yen. With the BOJ already owning a third of the stock of Japan government bonds any extra buying may be concentrated in other assets, such as REITs or ETFs."

Some heavyweight exporters gained, with Sony up 0.3 percent and Nissan gaining 1.6 percent.

Canon dropped 3.2 percent after cutting its full-year profit outlook Tuesday as demand for cameras in China and Southeast Asia failed to meet expectations.

In Korea, the benchmark Kospi index ended off 0.1 percent. Bucking the trend, LG Chem jumped 5.0 percent after the Nikkei Asian Review reported that the company was in talks with Tesla to supply batteries for the U.S. company's electric cars. In Japan, Tesla's current supplier, Panasonic, shed 1.9 percent.

Around the region, many Apple suppliers were lower despite the technology giant reporting earnings that beat analysts' expectations, in part due to Chinese consumers' love affair with the iPhone. But Apple provided an outlook that disappointed and that sent its shares lower in U.S. trade.

In Taiwan-listed suppliers, Hon Hai shed 0.7 percent, Catcher Technology shed 0.5 percent and Pegatron slipped 0.3 percent. Japan-listed Kyocera slipped 0.2 percent, but Japan Display added 1.1 percent.

Markets in Hong Kong and China were lower, with the Hang Seng Index closing 0.8 percent lower and the Shanghai Composite ending off 1.7 percent.

The Nasdaq composite erased early gains to close down 0.1 percent as Apple slipped more than half a percent. The Dow Jones Industrial Average shed 0.2 percent, weighed by IBM's 4 percent fall after the firm disclosed the SEC is conducting an investigation into its accounting treatment of certain transactions. The S&P 500 closed 0.3 percent lower, weighed by energy stocks amid declines in oil.