Asia Markets

Asia markets finish lower; Nikkei down 1.4% but ekes out weekly gain

Asia markets open up
Asia markets open up

Markets in Asia retreated further on Friday, with Japanese stocks coming under pressure from fresh strength in the yen against the dollar.

The benchmark wavered between gains and losses before closing down 234.13 points, or 1.41 percent, at 16,412.21. For the week, the index eked out a gain of 1.89 percent. Across the Korean Strait, the Kospi ended down 10.50 points, or 0.53 percent, at 1,966.99. In Hong Kong, the was off 1.53 percent in the afternoon.

Chinese mainland markets ended lower, with the closing down 8.48 points, or 0.3 percent, at 2,827.37, while the Shenzhen composite was off by 5.69 points, or 0.31 percent, to 1,784.32.

Down Under, Australia's benchmark ASX 200 closed down 30.30 points, or 0.57 percent, at 5,329, as resources stocks came under pressure.

Major miners in the country saw their shares drop more than 1 percent each. Rio Tinto closed down 2.72 percent, Fortescue shed 1.71 percent and BHP Billiton was off by 2.1 percent.

In Malaysia, the Kuala Lumpur composite index was down 1.36 percent in afternoon trade.

Data released on Friday showed Malaysia's first quarter 2016 gross domestic product grew 4.2 percent on-year, with increase in public and private consumption offsetting sluggish external demand. However, the pace slowed compared with the 4.5 percent growth registered in the fourth quarter of 2015.

"We do not see the resilience in private consumption to be sustainable due to slower wage growth and weak sentiment," said ANZ analysts Weiwen Ng and Glenn Maguire. "Malaysia's near term domestic and external demand profiles are likely to remain weak amid fiscal tightening and tighter credit conditions."

In Japan, shares of automaker Nissan retraced some of their initial gains to close up 4.09 percent, after the company took a 34 percent stake in rivals Mitsubishi Motors on Thursday, worth 237 billion yen ($2.17 billion). Nissan also released earnings on Thursday for the 12 months to March 31, 2016, which showed net income rising 14.5 percent on-year to $4.4 billion.

Mitsubishi Motors erased early morning gains to finish down 1.74 percent.

The Japanese yen traded at 108.60 against the dollar as of 2:44 p.m. HK/SIN, after closing the previous session at 109.01.

Major export stocks ended mostly lower, with shares of Toyota down 1.78 percent, Honda off 2.17 percent and Canon down 0.97 percent. A stronger yen is usually a negative for exporters as it reduces their overseas profits when converted into local currency.

With a relatively weak Japanese economy, the strong yen is of no help and the expectation for the Bank of Japan (BOJ) to add stimulus remains, according to Kathy Lien, managing director of foreign exchange strategy at BK Asset Management.

"Many economists expected the BOJ to add stimulus last month, and when they passed on doing so, the expectations were pushed out to the summer," she said.

According to the BOJ meeting minutes for the April 27 and 28 policy meeting, released on Thursday, the central bank said Japan's economy will likely be on a moderate expansion trend due to improvements in employment and income.

But, the statement added that growth rate will be somewhat lower than previous projections due to sluggishness in exports and production as a result of a slowdown in emerging economies.

SeongJoon Cho | Bloomberg | Getty Images

In the currency market, the dollar advanced against a basket of currencies overnight, with the dollar index advancing to the 94 handle from the 93 handle it traded at during Asian hours on Thursday. As of 2:47 p.m. HK/SIN, the index traded at 94.326, slightly off from a previous high of 94.335.

"The dollar gained ground versus funding currencies Thursday, but weakened against the commodity bloc as crude prices extended Wednesday's gains to new highs for the year in the WTI front contract," foreign exchange strategists at BNP Paribas said on Friday.

They added that economic data due stateside on Friday local time could provide further support for the dollar if they are positive.

The Australian dollar, however, slipped against the greenback, trading at $0.7287 on Friday evening local time, down from its last close at $0.7325. Lien said a combination of softer economic data and drop in iron ore prices pressured the Aussie.

"Consumer inflation expectations eased to 3.2% from 3.6%, the lowest level in 8 months. This explains the Reserve Bank's [of Australia] recent decision to cut interest rates and leaves the door open to additional easing," said Lien.

In central bank watch, the Bank of Korea kept its monetary policy unchanged, in a move that was widely expected. The Korean won strengthened against the dollar after the decision, with the dollar/won pair trading as low as 1164 before moving up to 1171.24 as of 2:53 p.m. HK/SIN.

In China, the onshore traded slightly weaker against the dollar, with the pair up 0.13 percent at 6.5225. Before the market opened, the People's Bank of China guided the yuan weaker by setting the dollar/yuan reference rate at 6.5246, a level not seen since early March this year. Thursday's fix was 6.4959.

China's central bank lets the yuan spot rate rise or fall a maximum of 2 percent against the dollar relative to the official fixing rate.

In offshore trading, the yuan traded at 6.5476 against the greenback. While the yuan is primarily traded on the mainland, and subject to strict central bank supervision, its offshore counterpart is accessible to everyone.

Stephen Innes, a senior foreign exchange trader at OANDA, said, "The markets appear very anxious with growing concerns that China's massive stimulus efforts now have long-lasting marginal effects, while the unbridled mainland credit boom has increased the financial sector's risks dynamically."

Chinese steel companies are a key source of risky debt.
China's commodities meltdown could rock the markets

Oil prices advanced in the U.S. overnight, but retreated again during Asian hours. Global benchmark Brent crude futures were down 0.89 percent to $47.65 a barrel, while U.S. crude futures dropped 1.13 percent to $46.17 in the afternoon.

Energy plays closed mostly lower in Asia, with shares of Santos down 2.8 percent, Oil Search down 1.6 percent and Inpex off 4.23 percent. Chinese mainland oil stocks were mixed, with China Petroleum up 0.43 percent and PetroChina down 0.14 percent.

In company news, Japanese electronics manufacturer Sharp reported a net loss of 255.9 billion yen for the financial year ended March 31, 2016, compared to the previous year's net loss of 222.3 billion.

Sharp also announced changes to its management as part of the takeover deal by Taiwan's Foxconn. 12 of the existing directors on Sharp's board will retire and the board's size will be reduced to 9; Foxconn's Tai Jeng-wu will be appointed as the new president of Sharp, replacing current president and CEO Kozo Takahashi. Changes will be made official in June, Sharp said.

Even with the sweeping changes, many analysts are not convinced of the company's ability to turn things around. An analyst from global investment banking firm Jefferies told CNBC on Friday Sharp "needs a miracle" to recover.

Shares of Sharp ended up 2.31 percent, while Foxconn shares gained 1.5 percent.

It will likely be business as usual after Filippine president-elect Rodrigo Duterte takes office, says the country's central banker Amando Tetangco.
Philippines central banker: 'Business as usual' after Duterte win

In Japan, SoftBank Corp, the telecom subsidiary of SoftBank Group, announced a partnership with Chinese e-commerce giant Alibaba to provide cloud computing services to startups and multinational companies in the country, using technology from Alibaba Cloud.

Eric Gan, CEO of the new joint venture SB Cloud and executive vice president at SoftBank, said the "JV team can develop the most advanced cloud platform for Japanese customers, as well as for multinational customers."

Financial details of the joint venture were not disclosed. SoftBank Group shares closed down 3.71 percent.

Elsewhere, reports said Apple has invested $1 billion in Chinese ride-hailing service Didi Chuxing, which was formerly known as Didi Kuaidi, in a bid to better understand the Chinese market.

The smartphone maker has come under pressure recently, after its quarterly earnings and revenue missed analysts' estimates. This week, rivals Alphabet, the parent company of Google, surpassed Apple in market capitalization to become the world's most valuable publicly traded company for the second time this year.

Apple suppliers in Asia ended mostly lower on renewed concerns over iPhone sales. Shares of Murata ended down 4.36 percent, Asahi Glass lost 3.56 percent, Taiwan Semiconductor down 1.37 percent and Pegatron losing 3.51 percent.

Elsewhere, on charges of breaking budget rules, a claim she denies.

The Bank of England cut its growth outlook for the U.K. from 2016 through to 2018 on Thursday, as it announced no change to its main interest rate and stock of purchased assets.

Stateside, the closed modestly up by 0.05 percent, the S&P 500 finished down 0.02 percent and the lost 0.49 percent.

— Follow CNBC International on Twitter and Facebook.