- Asia-Pacific markets fell Friday as investor sentiment turned cautious, following an overnight selloff stateside.
- In the currency market, the dollar erased most of its losses seen after the Fed decision on Wednesday.
- Overnight, oil prices collapsed on the back of demand recovery expectations and a relatively stronger U.S. dollar.
SINGAPORE — Asia-Pacific markets mostly fell Friday as investor sentiment turned cautious, following an overnight selloff stateside.
Australian shares traded lower, with the benchmark ASX 200 closed down 0.56% at 6,708.20 — the index retraced some of its earlier losses of more than 1%. The energy and materials sectors declined 2.03% and 1.41%, respectively, while the heavily-weighted financials subindex finished down 0.31%.
The Nikkei 225 in Japan declined 1.41% to 29,792.05 while the Topix index reversed losses to close up 0.18% to 2,012.21.
Japan's central bank concluded its two-day monetary policy meeting. It announced a raft of measures that included a decision to widen the range at which the 10-year Japanese government bond yield is allowed to fluctuate from the target level to between plus and minus 0.25%.
South Korea's Kospi fell 0.86% to 3,039.53 while the Kosdaq turned around losses to gain 0.24% to 952.11. Tech names sold off as shares of Samsung Electronics fell 1.21%, SK Hynix declined 2.82% and LG Electronics lost 1.61%.
Chinese mainland shares also declined: The Shanghai composite closed down 1.69% at 3,404.66 and the Shenzhen component lost 2.56% to 13,606.
The stock market on Wall Street struggled overnight, where tech shares were hit hard while the Dow and S&P 500 also declined. That weakness in shares was mirrored by an uptick in bond yields.
Yields move in the opposite direction to prices. Rising bond yields typically signal confidence about economic recovery and fears about inflation, which can make high growth stocks appear less attractive to investors.
"It was a mixed session for risk assets overnight as bond yields pushed higher in the aftermath of the FOMC meeting," analysts at ANZ Research wrote in a Friday morning note. "The Fed will wait for evidence of stronger data before raising their fed funds forecasts. This saw market measures of inflation expectations rise, sending bond yields up."
Still, banking and financial stocks in the region saw some gains.
In Australia, ANZ and Westpac eked out gains of 0.32% and 0.33%, respectively. Japan's Mitsubishi UFJ Financial Group rose 1.92%, Sumitomo Mitsui Financial Group was up 1.95%, Mizuho Financial added 1.39% and Nomura was up 1.28%.
"For the moment the impact of the higher yields is mostly evident in the comparative performances of the equity markets," Geoff Howie, markets strategist at the SGX, told CNBC by email.
"In APAC the two biggest sectors by market value are Financial Services and Technology. And with the higher yields on the long end of the (U.S. Treasury notes) are supportive to the bottom line of the banks, the banks are drawing institutional inflows," he said.
Financial companies typically benefit from rising interest rates as it expands their profit margin.
"The Federal Reserve has no plans to raise interest rates until 2023 but the recovery in the dollar and rise in Treasury yields tell us that investors continue to be drawn to the economy's positive outlook," Kathy Lien, managing director of foreign-exchange strategy at BK Asset Management said in a Thursday note.
Lien explained that the Fed will not be able to keep the U.S. dollar down "because vaccine rollout and stimulus checks will make for strong second quarter and second half recovery."
Oil prices see-sawed between gains and losses on Friday during Asian trading hours, following a sharp drop in the previous session.
Overnight, prices tumbled close to 7% or more for both U.S. crude futures and Brent.
"Crude oil prices collapsed as concerns over weaker demand in the short term deepened," the ANZ analysts wrote. "Following recent updates from IEA, EIA and OPEC, growth in oil demand looks likely to remain well below previously optimistic forecasts. This comes amid mixed economic data."
The stronger U.S. dollar also likely weighed on investor appetite in the sector.