Asia Markets

Most Asia markets close lower amid oil's wobble

Key Points
  • Oil prices retraced some of their losses after dropping around 4 percent in U.S. trade.
  • Yields on the 30-year Japanese government bond (JGB) rose to their highest level since February.
  • Minutes from the Federal Reserve Open Committee (FOMC) meeting in June reflected Fed officials' concern over the impact of interest rate hikes on the markets.

Most Asian markets lost ground on Thursday, despite the mostly stronger close on Wall Street, as oil prices rose, but failed to recoup all of their overnight losses.

Japan's fell 0.44 percent, or 87.57 points, to close at 5,758.8 while the Kospi edged down 0.02 percent, or 0.54 point, to close at 2,387.81.

The S&P/ASX 200 slipped by 0.08 percent, or 4.452 points, to close at 5,758.8 as weakness in the heavily weighted financials sub-index was offset by gains in the health-care sub-index.

Hong Kong's Hang Seng Index was off by 0.1 percent at 3:05 p.m. HK/SIN. Mainland stocks reversed losses to close higher. The Shanghai Composite rose 0.17 percent, or 5.3775 points, to close at 3,212.5117, and the Shenzhen Composite gained 0.076 percent, or 1.4479 points, to finish the session at 1,914.5858.

The 30-year Japanese government bond (JGB) yield rose to 0.893 percent, its highest level since February 23, with Reuters attributing the move to increased expectations that the European Central Bank (ECB), the Fed and other central banks will be tightening policy.

That would make those country's bond yields more attractive to investors than the lower-yielding JGBs. Bond yields move inversely to prices.

Shares of Hong Kong-listed Geely reversed earlier gains to trade down 0.35 percent. That came after Volvo, which was acquired by Geely in 2010, announced that cars launched by the brand from 2019 would all be electric or hybrid models.

In energy news, oil prices rose after slumping about 4 percent overnight. Brent crude futures gained 1.21 percent to trade at $48.37 a barrel and U.S. crude advanced 1.26 percent to trade at $45.70.

Fed likely on hold for rest of year: Expert
Fed likely on hold for rest of year: Expert

Investors also digested minutes from the Federal Open Market Committee's June meeting released on Wednesday U.S. time. The minutes reflected that several Fed officials had noted their concern over the impact of interest rate hikes on the markets. Officials were also divided over when the unwinding of the Fed's balance sheet would begin.

With some Fed members suggesting starting balance sheet reduction in September and others sounding less committal, a formal announcement on the unwind may not come until the September meeting, said National Australia Bank Head of FX Strategy Ray Attrill in a note.

The Fed, however, was expected to start no later than October, said Attrill, adding he expected a further rise in the Fed funds rate will come in December.

While earlier attempts to reverse accommodative monetary policy have been met by market tantrums, recent attempts have been different, Credit Suisse International Wealth Management CIO Michael O'Sullivan told CNBC's "Squawk Box" on Thursday.

"The Fed has raised rates three times in the last seven months. The markets haven't squeaked. And they will continue with this agenda until we begin to get some volatility in markets," O'Sullivan said.

'The end of accommodation'
'The end of accommodation'

In currencies, the dollar index, which measures the dollar against a basket of rivals, was nearly flat at 96.261 at 3:10 p.m. HK/SIN. The dollar was steady against the yen, with the greenback fetching 113.27 yen.

The Australian dollar slipped to trade at $0.7598 despite positive trade surplus figures in May. That was below the $0.76 handle seen over the past week, but off a session low of $0.7582.

Australia's trade surplus had widened in May due to a recovery in coal exports, Reuters reported. May's surplus rose to A$2.47 billion ($1.88 billion), compared with the A$1.1 billion forecast, Reuters said.

Stocks on Wall Street closed mostly higher. The S&P 500 gained 0.15 percent, or 3.53 points, to close at 2,432.54, and the Nasdaq rose 0.67 percent, or 40.79 points, to end at 6,150.85. The Dow Jones industrial average ended the session just below the flat line, down 0.01 percent, or 1.1 points, at 2,1478.17.

Ahead, the markets are likely to keep an eye out for employment data out of the U.S. ADP employment data was due on Thursday U.S. time and the non-farm payrolls numbers were due on Friday.