Asia Markets

Most Asia markets lower as Fed sticks to hawkish bent, metal prices eyed

Asian markets were mostly lower on Thursday after the U.S. Federal Reserve 'stuck to a hawkish bent overnight and as metals prices tumbled.

Australia's S&P/ASX 200 closed down 0.27 percent, or 15.942 points, at 5876.40, weighed by declines in resources and bank plays.

Hong Kong's Hang Seng Index ended down 0.05 percent, or 12.25 points, at 24,683.88. On the mainland, the Shanghai Composite shed 0.26 percent, or 8.056 points, to 3127.29, and the Shenzhen Composite lost 0.28 percent, or 5.39 points, to 1896.36.

In South Korea, the Kospi ended up 0.93 percent, or 20.59 points, at a record close of 2240.26 after being closed on Wednesday.

Singapore's Straits Times Index shed 0.21 percent by afternoon trade. Taiwan's Taiex ended up 0.12 percent, or 12.31 points, at 9967.64.

Japan's markets were closed for the Greenery Day holiday.

Among Australian resources plays, Rio Tinto dropped 1.80 percent, but BHP Billiton edged up 0.13 percent, after shedding 2.31 percent on Wednesday. Fortescue lost 4.79 percent and Newcrest shed 1.19 percent.

Tony Farnham, economic strategist at Patersons, said in a note Thursday morning, "most base metal prices were torched in Wednesday LME trading, with spot copper, nickel and zinc prices dropping by more than 3 percent on the day."

The drop in copper prices came after a jump in inventories increased worries about an economic slowdown in China, the world's largest consumer of the metal.

The inventory rise compounded concerns after the Caixin/Markit manufacturing PMI for April, released on Tuesday, showed a greater-than-expected decline to 50.3, the lowest since September 2016.

Declines in base-metal prices had already helped to weigh the Australian dollar, which took another leg down after China Caixin Services PMI for April showed the sector's growth cooled to its slowest in nearly a year.

The Aussie was fetching $0.7403 at 2:32 p.m. HK/SIN, down from around $0.7422 before the data's release, after falling from as high as $0.7545 in Wednesday Asian trade amid the metals price falls.

Among the banks, NAB was down 0.54 percent, erasing earlier gains. The bank reported first-half cash profit rose 2.3 percent to A$3.29 billion, beating a forecast for A$3.24 billion, according to Reuters.

Other banks also stumbled, with ANZ down 1.66 percent, extending Wednesday's 2.79 percent fall, while CBA fell 0.84 percent and Westpac lost 1.19 percent.

The Fed concluded its two-day policy meeting Wednesday afternoon, giving a positive assessment of the U.S. economy while keeping rates unchanged, as was widely expected.

In a statement, the Fed's policymaking committee did express some misgivings about the U.S. economy growing just 0.7 percent in the first quarter, but added they see the weakness as "transitory."

The , which measures the greenback against a basket of currencies, shot up on the news, rising as high as 99.394, compared with around 99 in Asia trade Wednesday.
At 2:33 p.m. HK/SIN, it was at 99.320.

"The dollar has moved higher on the back of the FOMC statement because investors are buying the Fed's hawkish view and they believe that the weakness in the economic data is transitory only," Naeem Aslam, chief market analyst at ThinkMarkets, said in a note.

Visitors hike up towards the Tilisunahuette mountain hut in the Raetikon mountain range on August 2, 2016 near Tschagguns, Austria.
Sean Gallup | Getty Images

"We do think that the dollar could fall below the level of 98 if the U.S. nonfarm payroll data (due Friday) undershoot the expectations. That is without any doubt the major element which is sticking out for traders."

The euro didn't appear to react much to the heated debate between French presidential candidates, far right Marine Le Pen and centrist Emmanuel Macron.

The was fetching $1.0885 at 2:34 p.m. HK/SIN, down from levels around $1.0930 early Wednesday.

While Macron has a decisive lead in opinion polls, market remain on edge over the possibility of a Le Pen upset as she has advocated a "Frexit," or French exit from the euro and from the European Union.

Chris Weston, chief market strategist at spreadbettor IG, said in a note Thursday that a Le Pen win was a "near-armageddon scenario."

"Pricing would suggest that while the debate was an absolute slugfest, but it probably lacked the depth and persuasion to move the undecided vote. One suspects if you were voting for Macron before the debate you heard little in the rhetoric to change that," he said.

In the U.S. on Wednesday, the closed 8.01 points higher, or 0.04 percent, at 20,957.90.

The S&P 500 fell 3.04 points, or 0.13 percent, to end at 2,388.13 and pulled back 22.82 points, or 0.37 percent, to close at 6,072.55.

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