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Asia markets fall as traders turn cautious after recent rally

Asia markets opened mostly red

Most Asian markets lost ground Tuesday, tracking U.S. equities' weak performance overnight, with some analysts saying traders are turning more cautious after the recent rally.

The Nikkei 225 closed down 116.68 points, or 0.68 percent, at 17,117.07, after wavering between positive and negative territories in the morning. In South Korea, the Kospi gave up early gains to close down 2.30 points, or 0.12 percent, at 1,969.97. Hong Kong's finished lower by 146.57 points, or 0.72 percent, at 20,288.77.

Chinese markets finished mixed, as the Shanghai composite eked out a gain of 4.75 points, or 0.17 percent, to close at 2,864.25, after spending most of the session in negative territory. The Shenzhen composite slid 16.20 points, or 0.92 percent, to 1,729.07.

The Australian S&P/ASX 200 index closed down 74.03 points, or 1.43 percent, at 5,111.42, weighed by losses in the energy sub-index, which fell 3.55 percent, and the financials sub-index, which was 1.39 percent lower.

Rodrigo Catril, a currency strategist for fixed income, currencies and commodities at the National Australia Bank, said in a morning note Tuesday that while Asia and European equities extended their gains on Monday, U.S. stocks reflected "a more hesitant mood."

"This cautious mode has also been reflected in currencies with the safe haven [Japanese yen] the only (small) outperformer against the [U.S. dollar]," he wrote.

Others were also taking a cautious tone.

Mark Matthews, head of research for Asia at Julius Baer, added in a morning note that while the world economy is essentially unchanged from where it was in mid-February, many asset prices are up by double digits. He warned, "If you weren't bullish a month ago, you probably shouldn't get too bullish now."

Kazuhiro Nogi | AFP | Getty Images

In the currency market, the Japanese yen remained at the 113 handle against the dollar, following the Bank of Japan's (BOJ) monetary policy decision. The dollar/yen pair traded lower by 0.34 percent at 113.42 as of 1:44 p.m. HK/SIN time.

The Japanese central bank kept monetary policy steady, maintaining its commitment to raise the monetary base by 80 trillion yen annually and left the rate it charges commercial banks on certain reserves at 0.1 percent.

Japanese exporters closed mostly lower, with Toyota and Nissan losing 1.82 and 1.71 percent, respectively. Electronics maker Canon trimmed gains to close up 0.21 percent. A strong yen is usually a negative for exporters as it reduces their overseas profits when converted into local currency.

Down Under, the Australian dollar/U.S. dollar pair gave up early gains to trade lower by 0.36 percent at 0.7486 as of 1:35 p.m. HK/SIN time, still near its highest level against the greenback since July 2015. The Aussie was trading at $0.75 before the Reserve Bank of Australia (RBA) released its March meeting minutes, with the central bank saying there were "reasonable prospects for continued growth in the economy" and that it was "appropriate to leave the cash rate unchanged at an accommodative setting."

Chris Weston, chief market strategist at IG, said in an afternoon note that the Aussie saw some "good selling" after the RBA minutes, with the pair fetching a session low of 0.7476 earlier, but "sense has prevailed as most traders see the minutes as dated and the Statement of Monetary Policy and [fourth quarter gross domestic product] have been released since then."

Weston said the ASX 200 under-performed on Tuesday in Asia, where markets have largely "been on the back foot" as the financial sector saw profit taking. Australia's so-called Big Four banks - ANZ, Commonwealth Bank of Australia, Westpac and NAB - closed down between 1.4 and 1.84 percent.

In China, the yuan weakened slightly against the dollar, with the dollar/yuan pair trading up 0.14 percent at 6.5074 late afternoon local time. Before market open, the People's Bank of China (PBOC) fixed the yuan midpoint rate at 6.5079, compared with Monday's fix at 6.4913.

Asia-Pacific Market Indexes Chart

Australian resources producers closed lower, with shares of Rio Tinto falling 3.37 percent, BHP Billiton down 3.44 percent and South32 shedding 4.55 percent.

Chinese metal plays were also lower, with Aluminium Corporation of China closing down 2.02 percent, Baoshan Steel lower by 1.33 percent and Shandong Jinling Mining down 3.97 percent.

Commodity prices retreated overnight. Copper futures on the London Metal Exchange (LME) fell 0.5 percent, while three-month aluminium shed 1.2 percent and three-month nickel was lower by 2.5 percent.

Elsewhere, iron ore was down at $55.50 a tonne, after moving above the $60-mark last week.

Oil prices retreated during Asian hours, following a drop in prices overnight on renewed concerns about oversupply. U.S. crude futures were down 2.21 percent at $36.36 a barrel as of 4:18 p.m. HK/SIN time, following a decline of 3.4 percent during U.S. hours. Global benchmark Brent shed 2.05 percent to $38.72 a barrel, after finishing lower by 2 percent overnight.

Reuters reported that a poll of analysts showed crude inventories across the U.S. likely hit record highs for a fifth straight week last week, forecasting a rise of 3.3 million barrels.

Over the weekend, Reuters, citing the Iranian ISNA news agency, reported Iranian oil minister Bijan Zanganeh said Iran would join discussions with other oil producers to freeze output after its own output reached four million barrels per day. The country currently produces around 3.1 million barrels a day, Reuters reported.

Energy plays in Asia were mostly lower, with Santos down 3.26 percent, Woodside Petroleum off by 3.92 percent and Japan's Inpex down 1.85 percent. Chinese mainland oil plays finished mixed, with China Oilfield shedding 1.71 percent, while Sinopec gained 4.15 percent.

In corporate news, the Japanese Nikkei newspaper reported that Toshiba is in a late-stage negotiations with Chinese household appliance giant Midea Group to sell the majority of its fully owned white goods business Toshiba Lifestyle Products & Services by this summer. The report added that the deal is expected to bring tens of billions of yen.

Shares of Toshiba gave up early gains to finish lower by 1.08 percent.

Overnight, major U.S. indexes closed mixed, with the Dow Jones industrial average flat, the S&P 500 lower by 0.13 percent and the Nasdaq composite flat.

In the U.S., the Federal Open Market Committee begins its two-day meeting later today local time.

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