Asia markets close mixed; Japanese shares under pressure from stronger yen, falling exports

Asia markets closed mixed on Monday, with Japan's shares dropping amid renewed strength in yen as fresh data showed the country's exports continued to fall.

The Nikkei 225 closed down 81.75 points, or 0.49 percent, at 16,654.60, retracing earlier losses of more than 1.5 percent, while the dollar-yen pair retreated to levels under 110.

Across the Korean Strait, the Kospi closed up 7.58 points, or 0.39 percent, at 1,955.25. In Hong Kong, the Hang Seng index gave up morning gains to trade down 0.38 percent in the afternoon.

Chinese mainland markets closed up, with the Shanghai composite adding 18.53 points, or 0.66 percent, to 2,844.01, and the Shenzhen composite closed up 26.03 points, or 1.45 percent, at 1,820.99.

Down Under, the benchmark S&P/ASX 200 wavered between gains and losses before closing down 32.36 points, or 0.60 percent, at 5,318.94, with major banking stocks and miners falling.

Shares of Rio Tinto closed down 2.31 percent, Fortescue shares ended down 3.96 percent and BHP Billiton was off by 2.55 percent.

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On the data front, Japan's Ministry of Finance data showed Japanese exports were down 10.1 percent on-year in April, reflecting sluggish demand from China, the emerging markets and the U.S. The decline was mostly in line with a Reuters poll of economists, which forecast a 10 percent decrease. Imports for April were down 23.3 percent on-year. The trade balance was 823.47 billion yen.

The yen strengthened after the data, with the dollar-yen pair falling as low as 109.61 from around 110.12 before the data's release; the pair was at 109.75 at 2:33 p.m. HK/SIN.

On Saturday, the U.S. also issued a fresh warning to Japan against competitive currency devaluation.

Japan's export stocks ended the session mixed, with shares of Toyota closing down 1.01 percent. Honda retraced losses to finish up 0.20 percent and Nissan shares reversed losses to end 0.48 percent higher.

A stronger yen usually weighs on exporters' shares as it lowers the value of their overseas earnings when they are repatriated to the home currency.

Markets around the region continued to take a relatively benign view of the rising possibility that the U.S. Federal Reserve will act on interest rates sooner rather than later.

Christopher Jue | Getty Images

"Many investors at first seem to dismiss impending Fed hikes as inconsequential, only to worry once they have arrived," Frederic Neumann, co-head of Asian economics research at HSBC, said in a note Monday, citing the region's "eerie tranquility" before the Fed hiked in December, followed by market fury erupting in January.

"Any tweaks to its policy stance will quickly reverberate across the region. This need not be terminal, and it likely won't cause outright financial stress. But it'll get bumpy," Neumann said.

The U.S. central bank has taken a hawkish turn, sending clear signals to the market last week that a June interest rate hike could be on the cards. New York Fed President William Dudley said that June was definitely a live meeting, while Richmond Fed President Jeffrey Lacker echoed the sentiment for a June hike to Bloomberg Radio.

The Fed's April meeting minutes also suggested a rate hike was imminent in June, if economic data pointed to stronger growth in the second quarter.

All of that has put a sharper focus on the U.S. dollar.

The dollar index, which measures the greenback against a basket of currencies, pushed above 95 by Friday, touching levels not seen since late March, compared with levels as low as 94.329 in the first half of the week. On Monday, as of 2:36 p.m. HK/SIN, the index traded at 95.193.

Elsewhere, the Australian dollar traded at $0.7242, with Chris Weston, chief market strategist at spreadbetter IG, saying in a note Monday that the Aussie was "supported at $0.7210 and consolidation is seen."

"This is the line in the sand for traders and a daily close below here suggests adding to short positions," he said.

In the equity market, Australia's heavily-weighted financials sub-index, which accounts for nearly half of the broader benchmark ASX 200, closed the session down 0.65 percent. Shares of major Australian banks fell, with ANZ down 0.56 percent, Commonwealth Bank of Australia lower by 0.2 percent, Westpac dropping 1.25 percent and National Australia Bank down by 0.55 percent.

A report by the Wall Street Journal on Sunday said many hedge funds are betting against the big Australian banks due to rising bad debts, falling earnings and fears of a property market downturn.

In company news, shares of Australian steel maker Bluescope advanced 7.35 percent after the company increased its earnings guidance for the half year ending June 30, 2016.

The company said it expects underlying earnings before interest and tax for the period to be around 270 million Australian dollars ($195 million), compared with previous guidance of A$209 million in February.

Oil prices retreated during Asian hours, with global benchmark Brent down 1.15 percent at $48.16 a barrel as of 3:46 p.m. HK/SIN. U.S. crude fell 1.32 percent to $47.77 a barrel.

Energy plays closed the Monday session mixed, with Santos shares down 2.07 percent, Oil Search declining 3.22 percent and Japan's Inpex closing down 2.21 percent. Chinese mainland oil plays ended mixed, with Sinopec giving up early gains to close down 0.16 percent, while China Oilfield gained 0.57 percent.

U.S. stocks closed higher Friday, with the Dow Jones industrial average up 0.38 percent, the S&P 500 adding 0.6 percent and the Nasdaq composite higher by 1.21 percent.

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