Stock markets in Asia mostly dropped on Wednesday, tracking U.S. losses, as uncertainty over central banks’ next moves spurred jitters and saw a spike in volatility.
Japan’s Nikkei 225 index closed down 114.80 points, or 0.69 percent, at 16,614.24, while the Topix index fell 8.25 points, or 0.62 percent, to 1,314.74.
Chinese mainland shares retreated, with the Shanghai composite closing down 20.83 points, or 0.69 percent, at 3,002.67, while the Shenzhen composite shed 9.07 points, or 0.45 percent, to 1,980.25.
Major indexes in Singapore, Malaysia, the Philippines and Indonesia also traded lower, with the Jakarta Composite index down 1.18 percent in afternoon trade.
Bucking the broad downward trend, the Hang Seng index in Hong Kong rose 0.12 percent by afternoon, after shedding much of its earlier 0.6 percent gain.
Australia’s benchmark ASX 200 also climbed, closing up 19.92 points, or 0.38 percent, at 5,227.70. The energy and materials sectors, however, lagged, closing down 1.44 percent and 0.61 percent respectively.
Oil plays in the country were lower, with Santos finishing down 5.65 percent, Oil Search off by 0.93 percent and Woodside Petroleum losing 0.73 percent.
Major Australian miners also sold off, with Rio Tinto down 1.33 percent, Fortescue off 1.69 percent and BHP Billiton down 1 percent.
The South Korean market was shut for a public holiday.
The Asian session followed a more than 1 percent sell-off in U.S. markets on Tuesday and an uptick in bond yields.
“The move is clearly related to a firming up of pricing for a December rate hike, with markets now expecting a 55 percent chance of a rate hike by the end of the year even as bets for a September rate hike fell,” said Wei Liang Chang, a currency strategist at Mizuho, in a note.
Markets were expected to remain volatile, with central banks in the U.S. and in Japan due to meet next week.
CMC Markets’ chief market analyst Ric Spooner wrote in a note to clients that the share market will “remain nervous while the current bond sell-off continues.”
“Markets have long contemplated the day when the global bond sell-off begins and creates a knock-on impact on share and property valuations,” he said.
Bond prices move inversely to yields and the sell-off has seen yields rise globally.
On Wednesday afternoon in the Asia session, the yield on the 10-year Japanese government bond was at negative 0.015 percent, up from levels below negative 0.04 percent late last week.
Elsewhere, the yield on the 10-year U.S. Treasury note was at 1.7185 percent, compared with levels near 1.540 percent in the previous week. The 10-year German Bund yield was at 0.0550 percent, rising from last week’s levels near negative 0.14 percent.
Spooner added that markets were reacting to “a growing impression that the European Central Bank (ECB) and [the] Bank of Japan (BOJ) are unlikely to add significantly to current stimulus plans, while the U.S. Fed will gradually move to lift rates.”
However, a report from the Japanese business daily Nikkei suggested the BOJ could potentially delve further into its negative interest rate policy. The Japanese central bank was set for a two-day policy meeting starting September 20.
Japanese banking stocks came under pressure on Wednesday, following the report. Shares of Mitsubishi UFJ sold off 3.17 percent, Mizuho Financial fell 1.03 percent and SMFG closed down 0.99 percent. Negative interest rates have pressured bank profits.
Oil prices took a hit in the U.S. session on Tuesday after the International Energy Agency (IEA) warned in its latest market update that it may take longer for oil prices to re-balance, citing a faster-than-expected slowdown in global oil demand growth.
That followed remarks from the Organization of the Petroleum Exporting Countries (OPEC) earlier this week that key central bank decisions, such as the one due in the U.S. later this month, would be crucial in determining the state of global growth and the overall health of the energy sector.
If the U.S. Federal Reserve does raise interest rates later this month, it would likely strengthen the dollar, which would make dollar-denominated oil trades more expensive for buyers holding other currencies. That could, in turn, hamper global demand and consumption.
“Long-suffering oil bulls will now turn nervously to the U.S. Energy Information Administration’s commercial crude inventory numbers to be released [later in the global day],” said Jeffrey Halley, a senior market analyst at OANDA.
“It was an unexpected undershoot in these numbers last week that set off the rally in crude last week. A rebound in this data will no doubt create an emotional day for oil longs in the New York session,” Halley added.
During Asian hours on Wednesday, U.S. crude futures rebounded modestly, up 0.82 percent at $45.27 a barrel, following a 3 percent drop overnight, after data from the American Petroleum Institute showed a smaller-than-expected build up of crude inventories for the week ended September 9.
Global benchmark Brent added 0.62 percent to $47.39 as of 3:02 p.m. HK/SIN, after falling 2.5 percent on Tuesday.
In the currency market, the dollar index, which measures the greenback against a basket of currencies, was at 95.471 at 3:05 p.m. HK/SIN, off an earlier high of 95.662, but up from levels under 95 last week.
The Japanese yen traded at 103.29 against the greenback, with the Japanese currency down from an earlier session high of 102.40.
In company news, shares of Japan’s Seiko Holdings fell 5.95 percent after the watchmaker cut its profit outlook. Reuters reported the company said it expected a group net profit of 3 billion yen in the full fiscal year through March 31, down from its previously projected net profit of 10 billion yen.
Stateside, the Dow Jones industrial average fell 258.32 points, or 1.41 percent, to 18,066.75. The S&P 500 slid 32.02 points, or 1.48 percent, to 2,127.02, while the Nasdaq ended down 56.63 points, or 1.09 percent, at 5,155.25.
Source: CNBC
