Asia markets mixed after Wall Street gains, oil rebounds, as Fed eyed

Asian markets were mixed on Wednesday, as gains on Wall Street overnight were offset by disappointment with Apple earnings, with traders looking ahead to the U.S. Federal Reserve meeting results.

In Australia, the S&P/ASX 200 was down 0.25 percent amid declines in banking and some resources shares.

On the mainland, the Shanghai Composite shed 0.20 percent, while the Shenzhen Composite was off 0.22 percent.

Taiwan’s Taiex was up 0.19 percent, while Singapore’s Straits Times Index added 0.55 percent.

Markets in Japan, South Korea and Hong Kong are shut Wednesday for public holidays. Japan is shut for the rest of the week for the Golden Week holiday.

The Fed was expected to hold interest rates steady after its two-day meeting that began Tuesday, as it pauses to examine more economic data, but it may hint that conditions are on track for an increase in June.

Market expectations for a rate hike following this meeting are just 4.8 percent, according to the CME Group’s FedWatch tool.

“The solid increase in first quarter employment costs will give the FOMC confidence that inflation remains on track to meet its medium term target of 2 percent per annum. We expect the FOMC to leave policy unchanged tomorrow but increase the Funds rate in June,” Commonwealth Bank said in a note on Wednesday.

Shares of Apple suppliers were mixed after the iPhone maker’s earnings disappointed.

Apple reported after the bell. While quarterly earnings beat expectations, revenue fell short of estimates as the company sold fewer iPhones than expected.

The tech giant guided to third quarter revenue of around $44.5 billion, a bit below market consensus. Apple shares were down 2.4 percent in post-market trade.

Among suppliers, Hon Hai was flat, Pegatron shed 0.22 percent, but Largan added 0.5 percent and Catcher rose 1.13 percent.

Nomura said in a note on Wednesday that the outlook for suppliers could improve ahead.

“The market expects Apple to launch new iPad series in the June quarter, and we think the new products will help to revive iPad component makers’ revenues in the second quarter of 2017,” Nomura said

In Asian trade, oil prices rebounded with U.S. light crude up 0.90 percent at $48.09 a barrel at 8:48 a.m. HK/SIN, after dropping 2.4 percent overnight, and Brent rose 1.05 percent at $50.99, after falling 2.3 percent overnight.

Overnight, oil prices sharply extended losses just before Tuesday’s settlement, with U.S. crude breaking below $48 a barrel for the first time in more than a month.

The contracts had tumbled overnight as rising output in the United States, Canada and Libya offset news of falling production in Russia and OPEC. But after the market close, industry estimates showed crude inventories fell a more than expected 4.16 million barrels at the end of last week, the American Petroleum Institute (API) said Tuesday, offering support.

Among Australian-listed companies, BHP Billiton’s ration outlook was changed to positive from stable by Moody’s Investors Service on Wednesday, while keeping the A3 rating unchanged.

“The change in outlook to positive reflects our expectation that BHP Billiton will continue to generate material earnings and solid free cash flow in the current environment,” Matthew Moore, a senior credit officer at Moody’s said in a statement.

“This will allow the group to maintain strong margins and credit metrics for its ratings over the next 12-18 months, despite our expectations for lower commodity prices.”

BHP shares were down 2.06 percent at 10:54 a.m. HK/SIN, swept in a downdraft among Australian resources plays.

Rio Tinto was down 1.46 percent, Alacer Gold was off 2.39 percent and Woodside shed 0.20 percent.

Shares of Australia-listed telecom Vocus plunged 23 percent after the company cut its earnings outlook for fiscal 2017, saying it expected earnings before interest, tax, depreciation and amortization (Ebitda) at $365 million to $375 million, compared with previous guidance of $430 million to $450 million. That followed an accounting review of when to recognize revenue as well as lower forecast billings and an increase in service delivery headcount.

Citi cut shares of Vocus to Neutral from Buy and slashed its target price to A$3.40 from A$6.00 in a note on Tuesday.

“With revenue falling short of expectations and operating costs rising, we no longer have confidence that Vocus will be able to deliver on the full potential of its recently combined businesses,” Citi said.

But it added that it didn’t cut the shares to sell because while the company “clearly faces some serious challenges,” its underlying assets are valuable and the stock has already dropped significantly.

In the currency markets, the U.S. dollar index, which measures the greenback against a basket of currencies, fell to 98.909 by 9:30 a.m. HK/SIN, after touching levels above 99 overnight.

The dollar fetched 112.04 yen at around 8:37 a.m. HK/SIN, down from highs around 112.30 yen overnight.

U.S. equities closed mostly flat on Tuesday. The Nasdaq composite hit an intraday record of 6,102.72 and eked out a closing record, with shares of Apple also hitting a new high.

Apple’s stock also had the most positive impact on the Nasdaq 100 index, which also reached a record high ahead of the results.

Source: CNBC