Asia stock markets mixed as Nikkei sells off on yen strength, BOJ uncertainties

Asian stock markets were mixed Thursday amid lingering uncertainty over key central bank policy meetings next week, while markets in China, Taiwan and South Korea were closed for public holidays.

Japan’s Nikkei 225 slipped 209.23 points, or 1.26 percent, to 16,405.01, while the Topix index fell 13.63 points, or 1.04 percent, to 1,301.11 as stocks came under pressure from a relatively stronger yen and growing uncertainty over the Bank of Japan’s (BOJ) monetary policy meeting due next week.

“Market sentiment is fragile ahead of the BOJ’s comprehensive policy review,” said analysts at Singapore’s DBS Bank in a note, adding a high degree of uncertainty over what the central bank would do at its meeting fueled volatility in the market.

The DBS analysts added there is “a good chance that the BOJ will revise the composition of the QQE program, increase the flexibility in the scale/category of asset purchases, and delete the timeline for achieving the 2 percent inflation target.”

Japanese banking and finance shares fell amid the uncertainty surrounding the BOJ, with Mitsubishi UFJ closing down 1.93 percent, SMFG off 1.88 percent, Mizuho down 1.62 percent and Nomura Holdings off by 2.16 percent.

In Hong Kong, the Hang Seng index added 1.03 percent in afternoon trade, while Indonesia’s Jakarta composite was up 2.07 percent. Major indexes in Singapore, Malaysia and India traded lower.

Australia’s ASX 200 closed up 12.16 points, or 0.23 percent, at 5,239.86, erasing losses of near 0.3 percent seen in early trade. The energy sector, however, finished down 1.21 percent, with major oil plays selling off.

Shares in Santos fell 2.85 percent, Oil Search was down 0.78 percent and Woodside Petroleum declined 1.06 percent.

The session in Asia followed a mixed finish in the U.S. on Wednesday, with the Dow Jones industrial average closing down 31.98 points, or 0.18 percent, at 18,034.77. The S&P 500 index slipped 1.25 points, or 0.06 percent, to end at 2,125.77, while the Nasdaq gained 18.52 points, or 0.36 percent, to 5,173.77.

“Mental preparations for another onslaught of selling bonds and equities offshore were put on the backburner, with markets becalmed overnight,” said David de Garis, a senior economist at the National Australia Bank (NAB), in an early morning note.

Oil prices dropped on Wednesday, following mixed U.S. inventory data.

Data from the Energy Information Administration showed that stateside inventories of distillates, which include diesel and heating oil, rose by 4.6 million barrels in the week to September 9. According to Reuters, this was higher than analysts’ expectations for a 1.5 million barrel increase.

In contrast, crude inventories fell by 559,000 barrels despite market expectations for a 3.8 million barrel build up.

Thursday during Asian hours, U.S. crude futures were up 0.32 percent at $43.72 a barrel as of 3:26 p.m. HK/SIN, after dropping 2.9 percent in the U.S. session. That followed a 3 percent on Tuesday. Global benchmark Brent was up 0.61 percent at $46.13, following an overnight drop of 2.7 percent.

In the currency market, the dollar advanced against a basket of currencies, with the dollar index at 95.499, up from levels under 95 last week.

Among other major currency pairs, the Japanese yen strengthened against the dollar to a session high of 101.92, compared with levels near 103.29 on Wednesday afternoon local time. As of 3:28 p.m. HK/SIN, the dollar/yen traded at 102.42.

Renewed strength in yen likely put pressure on major export stocks, with Toyota selling off 1.32 percent, Nissan down by 2.42 percent and Sony off by 1.21 percent.

The Australian dollar traded at $0.7459, following a weaker-than-expected employment report. Before the release of the report, the Aussie was at levels near $0.7479.

Data from the Australian Bureau of Statistics showed the seasonally adjusted unemployment rate slipped marginally to 5.6 percent in August, from 5.7 percent registered in July. The number of employed persons fell by 3,900 on-month in August, which Reuters reported sharply missed the market forecast of a 15,000 gain.

Some analysts were not concerned by the weaker-than-expected jobs data.

“The basic message [in the jobs report] is that the labor market is still solid – employment growth at 1.5 percent year on year remains robust and the continuing downtrend in the unemployment rate from last year’s high of 6.3 percent is a positive sign,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital.

Currency strategists at BNP Paribas further noted the real risks facing the Aussie were external, not domestic, and that the currency could fall further in the near term.

“While global long-end bonds recovered some ground Wednesday, taking some pressure of the Aussie, we expect steepening pressures to persist in the next few weeks, which should weigh on the risk environment and the commodity exporter currencies,” the strategists wrote.

Bond yields fell overnight as prices climbed, which NAB’s de Garis reckoned could have been due to either the “softness in oil” or perhaps the market was “taking a breather.”

The yield on the benchmark 10-year U.S. Treasury note was at 1.7063 percent on Thursday afternoon, compared to 1.7185 percent on Wednesday afternoon Asia time. The yield on the 10-year Japanese government bond fell to negative 0.038, compared to levels near negative 0.015 percent in the previous session. Prices move inversely to yields.

Upcoming monetary policy meeting from the U.S. Federal Reserve is also in focus for market watchers.

Source: CNBC