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Asia markets mostly lower after North Korea nuclear test

Asian markets ended mostly lower on Friday after North Korea claimed its fifth nuclear test and amid disappointment following the European Central Bank's policy decision.

Japan's benchmark ended essentially flat at 16,965.76, erasing early losses, while South Korea's Kospi finished down 1.31 percent, or 25.86 points, at 2037.87, after North Korea said it tested a miniaturized nuclear warhead in response to the "threats and sanctions from hostile elements."

Samsung also weighed on the Kospi. Shares tumbled 4.2 percent as the U.S. Federal Aviation Administration urged passengers not to turn on or charge their Galaxy Note 7 smartphones during flights and not to stow them in checked baggage due to concerns over the fire-prone batteries.

Australia's S&P/ASX 200 closed down 0.86 percent, or 46.551 points, at 5339.20, dragged by a 1.38 percent drop in its heavily-weighted financials subindex, partly offset by gains in the energy and materials sectors.

Chinese markets fell in the last hour of trade after trading flat throughout the session, with the composite falling 0.55 percent, or 17.10 points, to 3078.85 and the Shenzhen composite shedding 0.73 percent, or 15.06 points, to 2035.02. .

The index bucked the trend, closing 0.81 percent higher, after reports that China was allowing mainland insurers participate in the Shanghai-Hong Kong stock connect.

Johannes Eisele | AFP | Getty Images

Financials led the gains in Hong Kong; Bank of East Asia popped 2.89 percent, Bank of China (Hong Kong) added 1.91 percent and HSBC ended up 0.8 percent.

The European Central Bank (ECB) surprised markets on Thursday by deciding not to extend the deadline of its bond-buying program. It also lowered its growth and inflation forecasts for 2017 and 2018.

"Yesterday's no-change stance, however, does not diminish the need for further easing," Radhika Rao, an economist at DBS Bank, said in a note Friday, citing inflation data remaining well below the central bank's 2 percent target. "But there was no explicit mention of fresh measures under consideration, spurring a knee-jerk negative reaction in the markets."

On the data front, China's August inflation grew at its slowest pace year-on-year since October 2015.

In South Korea, the central bank held interest rates at 1.25 percent for the third straight month at its policy meeting, as expected, as it took a cautious approach to increasing household debt while awaiting the Fed's next move.

Oil prices resumed their declines in Asia trade, with both Brent and U.S. crude falling around 1 percent each by late afternoon.

Prices soared more than 4 percent on Thursday after U.S. Energy Information Administration said crude stockpiles dropped by 14.5 million barrels last week to 511.6 million barrels, the biggest weekly drop since January 1999, Reuters reported.

"The record drop is being further propelled by oil production disruptions from storms in the Gulf. Markets have realized that the lack of supply is real and fundamentally driven, which will help the oil price over the short-term at least," said Anthony Darvall, chief market strategist at trading platform easyMarkets, in a note Friday.

Asia-Pacific Market Indexes Chart

Markets will also pay attention to Federal Reserve voting members Eric Rosengren and Daniel Tarullo, who were scheduled to speak later in the day, for hints on Fed rate expectations.

"Despite the slightly wobbly U.S. data-flow, the primary risk to dollar volatility may continue to stem from Fed rhetoric before the black-out period ahead of the FOMC," said Emmanuel Ng, FX strategist at OCBC Bank, in a Friday note.

The traded slightly weaker at 94.852 against a basket of currencies during Asian hours.

Major U.S. indexes closed lower; the Dow Jones industrial average was down 0.25 percent at 18,479.91, the finished lower by 0.22 percent at 2,181.3 and the Nasdaq composite ended down 0.46 percent, snapping a four-day winning streak as Apple slipped 2.6 percent.

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