Checkout
Cart: $0.00 - (0 items )

Asia markets weaker as traders weigh US rate risk

Thursday 02.50 BST

Overview

Asian stock markets were mostly weaker on Thursday as investors processed the outlook for US monetary policy with a drop in commodity prices and an effort to tame financial risks in China.

Hot topic

The Federal Reserve decided on Wednesday to keep interest rates unchanged, as expected, but left open the prospect of raising them next month. The US central bank described the slowdown in growth during the March quarter — which sent a chill through markets at the end of last week — as “transitory” and said consumption growth had been solid and inflation was running close to its target.

The probability of the Fed lifting rates 25 basis points at its June meeting jumped to 90 per cent, according to pricing data tracked by Bloomberg, from a 61.1 per cent chance a week ago.

The dollar index, a measure of the US currency against a basket of global peers, was up 0.1 per cent on Thursday in Asia after a 0.2 per cent gain in the previous sessions. The yield on the benchmark US 10-year Treasury rose 3.8 basis points to 2.318 per cent on Wednesday. Yields move in the opposite direction to price. The S&P 500 closed 0.1 per cent lower.

Equities

China’s Shanghai Composite and the technology-focused Shenzhen Composite were each down 0.5 per cent. Mainland markets are drawing attention as money-market rates hovered around two-year highs amid authorities’ efforts to tame financial risks by squeezing liquidity.

South Korea’s Kospi was up 0.6 per cent at a record intraday high and on track to surpass its previous peak set six years ago. The index’s advance has been underpinned by gains for Samsung Electronics, which was up 1.3 per cent at a record high on Thursday.

Australia’s S&P/ASX 200 was off 0.5 per cent, adding to a 1 per cent fall on Wednesday that was the biggest one-day drop since late March. Commodity stocks were weak, owing to big falls in the price of iron ore.

Fortescue Metals was down 4.3 per cent and one of the worst performers in the S&P/ASX 200. BHP Billiton fell 0.7 per cent, with the Australian government also stating it would block any attempt by the miner to incorporate the company in the UK, a proposal requested by activist hedge fund Elliott Associates.

Hong Kong’s Hang Seng was 0.4 per cent lower as investors returned from a public holiday. Japanese markets were closed on Thursday.

Forex

The Australian dollar was down 0.2 per cent at a four-month low of $0.7411. The currency tumbled 1.5 per cent against its US counterpart on Wednesday — its biggest one-day drop since the US presidential election — weighed down by commodity prices and a more hawkish outlook for US interest rates.

The British pound was up 0.1 per cent at $1.2875, recovering about one-tenth of Wednesday’s decline after UK prime minister Theresa May denounced “threats” from the European side of Brexit negotiations.

The Japanese yen was 0.1 per cent softer at ‎¥112.81 per dollar, its weakest since mid-March and was on track for a sixth straight decline.

Commodities

Iron ore futures were down as much as 8 per cent to Rmb485 a tonne on China’s Dalian Commodity Exchange on Thursday. Base metals on the London Metal Exchange were all lower on Wednesday.

Brent crude, the international oil benchmark, was down 0.2 per cent at $50.68 a barrel, while West Texas Intermediate was off 0.2 per cent at $47.71.

Gold was up 0.2 per cent at $1,241.18 per ounce.

For market updates and comment follow us on Twitter @FTMarkets