Asia markets end lower as dollar rebound weighs on commodities, oil

Asia markets stumbled on the final trading day of the week, as a stronger dollar weighed on commodity prices, while Japan's benchmark government bond yield hit a record low ahead of next week's closely watched Bank of Japan meeting.

In Australia, the ASX 200 closed down 49.33 points, or 0.92 percent, at 5,312.60, led by 1 percent or more declines in the financials, energy and materials sub-indexes as banks and resources producers came under pressure.

Analysts said the weakness was likely due to the hit that commodity prices took overnight as a result of the stronger dollar. Most commodity prices are denominated in dollars, while Australia's big banks have exposure to the resources sector.

The so-called Big Four banks - ANZ, Commonwealth Bank of Australia, Westpac and NAB - finished down between 0.86 and 1.29 percent.

Japan's Nikkei 225 closed down 67.05 points, or 0.4 percent, at 16,601.36, as the yen maintained relative strength against the dollar.

Meanwhile, the 10-year Japanese government bond (JGB) yield fell to negative 0.147, after dropping as low as negative 0.15 earlier in the session. Bond yields move inversely to prices.

Many analysts expect that after the Bank of Japan's policy meeting ends next week on June 16, the central bank will likely announce further easing measures, which could include more purchases of JGBs. That could be spurring JGB buying from market players hoping to profit by reselling bonds to the central bank later.

Japan bank shares were also mostly lower, potentially as they are required to hold JGBs and the low yields can hurt their profits. Additionally, there is a possibility that the Bank of Japan could send interest rates deeper into negative territory, which would hurt banks' profit margins.

Shinsei Bank shed 1.86 percent and SMFG lost 1.33 percent.

Across the Korean Strait, the Kospi fell 6.54 points, or 0.32 percent, to 2,017.63. In Hong Kong, the market returned to trade after being shut on Thursday, with the Hang Seng index dropping 1.07 percent.

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Oil ended three days of gains on Thursday, after a relatively stronger dollar likely led to profit-taking among investors, and crude prices continued the downward trend during Asian hours on Friday. But prices held above the psychologically key $50 level.

As of 2:57 p.m. HK/SIN, the global benchmark Brent was down 0.92 percent at $51.47 a barrel while U.S. crude dropped 1.11 percent to $50.00 after falling 1.31 percent overnight.

Energy stocks in the region closed lower, with Santos shares down 1.87 percent, Oil Search off 1.71 percent and Inpex off by 2.91 percent. Hong Kong-listed shares of CNOOC were off by 0.62 percent.

Woodside Petroleum shares were off by 1.28 percent. Earlier this week, Credit Suisse downgraded Woodside Petroleum to underperform from a neutral rating, saying in a note the bank saw the majority of risks as still to the downside. "It is hard to find a positive catalyst outside of the oil price," the note added.

The dollar index, which measures the greenback against a basket of currencies, climbed to about 94.181 as of 3:00 p.m. HK/SIN on Friday from lows around 93.565 on Thursday afternoon Asia time .

Kathy Lien, managing director for foreign exchange strategy at BK Asset Management, said in a note late Thursday, "The smaller-than-expected increase in U.S. jobless claims helped [the turnaround in the dollar], but it has been a while since this report had any meaningful impact on the greenback. So the question now is whether today's reversals will turn into a ... bottom for the dollar."

U.S. weekly jobless claims unexpectedly fell last week to a seasonally adjusted 264,000, compared with a Reuters poll of economists that expected initial claims would rise to 270,000.

Other commodities, also denominated in the dollar, suffered overnight on the back of a stronger greenback. A stronger dollar makes commodities more expensive for non-U.S. buyers, dampening demand. Reuters data showed three-month copper on the London Metal Exchange fell 1.4 percent to $4,516 a tonne on Thursday.

"This dollar spike has sent jitters through the commodities complex with copper, in particular, having an awful night," said Angus Nicholson, a market analyst at IG. "LME copper prices hit their February lows, as LME copper inventories look to have seen a massive influx from Chinese copper inventories."

Australian miners closed lower, with Rio Tinto down 2.99 percent, Fortescue off by 1.53 percent and BHP Billiton shedding 4.13 percent.

A Reuters report said Brazil's federal police said on Thursday they had completed a criminal investigation into a dam burst last November at a mine run by Samarco, a joint venture between BHP and Vale. Reuters said the police accused the three companies and eight employees of various crimes including willful misconduct.

In other company news, shares of Virgin Australia jumped 3.57 percent, after reports said Air New Zealand had agreed to sell a 19.98 percent stake in the airline to China's Nanshan Group. Air New Zealand shares added 2.3 percent.

Philippe Lopez | AFP | Getty Images

South Korean shipbuilder Daewoo Shipbuilding & Marine Engineering said Thursday it clinched a $580 million order to build four carriers for a Greek shipper, according to the Korea Herald. Daewoo Shipbuilding shares closed up 2.96 percent.

Shares of South Korean conglomerate, Lotte Group, were under pressure after Reuters reported that Seoul prosecution investigators raided the company's headquarters Friday morning as part of an investigation. Shares of Lotte Shopping closed down 1.55 percent and Lotte Himart dropped 2.12 percent.

The Korean won weakened against the dollar, with the dollar/won pair trading at 1165.87, compared with Thursday's close at 1157.99.

On Wednesday, Reuters reported the South Korean finance minister said the government and the Bank of Korea will create an 11 trillion won ($9.50 billion) fund to support the two state-run banks most exposed to the shipping and shipbuilding firms currently being restructured.

In a note Wednesday, Nomura said that the move was a positive for the won, as it would keep shipbuilders' large foreign-exchange hedges from being unwound, as would have been likely if the companies had closed. But the bank added that it remains short on the currency as the risk that ship orders would be cancelled remained and the economic outlook was still dim.

Elsewhere, the Japanese yen traded at 106.80 against the dollar as of 3:05 p.m. HK/SIN, compared with levels near 106.52 on Thursday afternoon local time and levels near 107.80 earlier in the week.

Major export stocks in Japan closed mixed, with Toyota shares reversing losses to finish up 0.43 percent, Nissan adding 0.19 percent andSony off by 0.75 percent.

"We have had a solid rebound [in the dollar/yen] after testing the 106.35 depths," said Stephen Innes, a senior foreign exchange trader at OANDA. Innes said the surge in the currency pair was being driven by the surprise in weekly jobless claims stateside as "the market was very much short dollar at time of release."

Innes added that Japan's core machinery order for April, which dropped 11 percent in a sign that business investment in the country was contracting, will likely catch policymakers' attention. "Given this staggering decline, we may start to hear more rhetoric about the fiscal stimulus, which could lend a hand to the higher dollar/yen argument," he said.

Markets in China and Taiwan were closed Friday for the Dragon Boat Festival.

Stateside, the Dow Jones industrial average closed down 19.86 points, or 0.11 percent, at 17,985.19, the S&P 500 was lower by 3.64 points, or 0.17 percent, at 2,115.48 and the Nasdaq composite ended down 16.03 points, or 0.32 percent, at 4,958.62.

— Reuters contributed to this report.