Japanese shares drop as yen strengthens to 108 vs dollar

Markets in Asia traded mixed on Thursday, with Japanese shares dropping amid a stronger yen against the dollar.

The benchmark Nikkei 225 declined 1.14 percent, while the Topix also fell 1.14 percent. Banks, financial institutions, trading houses and major exporters were all lower. The dollar fetched about 108.85 yen, with the Japanese currency strengthening from levels over 111 reached earlier in the week.

Among major exporters, Toyota shares fell 1.59 percent, Mitsubishi Electric declined 1.49 percent and Sony was down 1.04 percent.

The strength in the yen corresponded with broad declines in the dollar, following President Donald Trump’s remarks to the Wall Street Journal that the greenback was getting “too strong.” That pushed the dollar index, which measures the dollar against a basket of currencies, lower from levels near 100.80 to about 100.06 on Thursday at 11:13 a.m. HK/SIN.

“With political tensions remaining high and Trump’s call for a lower dollar, traders are more likely to take notice of bad news over good to keep pressure on the dollar and support the yen,” said ThinkMarkets’ senior market analyst Matt Simpson in a note.

In the interview with the Journal, Trump also reversed a crucial campaign promise and said his administration will not label China a currency manipulator in a report due this week.

“As most knew all along, if China was manipulating its currency, it was in Trump’s favor, not vice versa. The renminbi has appreciated against its trading partners by 40 percent over the past dozen years and continues to do so today,” analysts at Singapore’s DBS Bank said in a note.

In South Korea, the Kospi traded up 0.22 percent, after the Bank of Korea kept its base rate unchanged at 1.25 percent on Thursday. In its policy statement, the South Korean central bank said global economic recovery has continued to expand; it added it will maintain an accommodative monetary policy stance.

The Korean won strengthened against the greenback on Thursday, trading at 1,129.10 at 11:23 a.m. HK/SIN, climbing from an earlier low of 1,137.90.

In Australia, the ASX 200 traded down 0.85 percent, with the materials sector down by 3.08 percent. Major resources producers were notably lower, with Rio Tinto down 4.73 percent, Fortescue down by 6.86 percent and BHP Billiton lower by 4.3 percent.

Major Australian banking stocks as well as energy names were also lower. The Australian dollar traded higher against the greenback at $0.7576, up from a previous low of $0.7515.

Earlier in the day, the Australian Bureau of Statistics data showed seasonally adjusted employment Down Under rose by nearly 61,000 jobs from February to March, beating a Reuters forecast of 20,000.

Economists reckon the strength of the jobs report will please the Reserve Bank of Australia (RBA).

“We think the RBA would be pleased with the strength in employment in today’s numbers, although the stubbornly high unemployment rate will remain a source of concern,” said Felicity Emmett, senior economist at ANZ.

She added, ” With spare capacity in the labor market taking longer than expected to be worked off, and the resulting dampening impact on wages growth, we remain comfortable with our view that the RBA is likely to be on hold for an extended period.”

Markets in Greater China traded mostly higher. Mainland Chinese markets rose, with the Shanghai composite up 0.12 percent and the Shenzhen composite higher by 0.5 percent. In Hong Kong, the Hang Seng index was fractionally lower by 0.09 percent. Taiwan’s Taiex rose 0.22 percent.

Chinese trade data released Thursday showed exports rose 16.4 percent in March, beating a Reuters forecast of 3.2 percent, reversing a decline of 1.3 percent in February. Imports rose 20.3 percent, down from a surge of 38.1 percent in the previous month but still beat expectations of 18 percent uptick by analysts.

The yuan strengthened against the dollar; the on-shore yuan traded at 6.8789 against the greenback, while the off-shore yuan fetched 6.8746.

In corporate news, Western Digital warned that troubled Japanese conglomerate Toshiba will breach a joint venture contract if it sells its memory chip unit. Toshiba is looking to spin off its memory business in order to cover billions in losses incurred by its U.S. nuclear arm, Westinghouse. Toshiba shares were lower by 2.67 percent.

Hong Kong carrier Cathay Pacific announced several changes in top management, with Chief Operating Officer Rupert Hogg due to replace current Chief Executive Ivan Chu on May 1. The company said in a press release that Chu would be taking on the role of chairman at John Swire & Sons to focus on opportunities in mainland China.

The airline posted losses in March, the first time the company has reported annual losses since the 2008 financial crisis. Cathay Pacific shares rose 2.2 percent in late-morning trade.

Oil prices also fell, after data from the Energy Information Administration showed a build up in U.S. inventories. Reuters reported the EIA report showed stockpiles at the U.S. crude hub at Cushing, Oklahoma, rose 276,000 barrels in the week.

Brent fell 0.18 percent to $55.76 a barrel, while U.S. crude was down 0.19 percent at $53.01.

Meanwhile, Singapore’s trade-reliant economy shrank 1.9 percent in the first quarter from the previous three months on an annualized basis, weighed by contractions in manufacturing and services, preliminary data showed on Thursday.

Separately, Singapore’s central bank left monetary policy steady on Thursday in a widely expected decision.

Stateside, U.S. equities were lower across the board. The Dow Jones industrial average declined 0.29 percent, or 56.44 points, to close at 20,591.86, the S&P 500 fell 0.38 percent, or 8.85, to end at 2,344.93 and the Nasdaq dropped 0.52 percent, or 30.61 points, to finish at 5,836.16.

U.S. markets were waiting on earnings announcements from several major U.S. financials, including Citigroup, JPMorgan Chase and Wells Fargo. The banks were expected to report results on Thursday ET.

Source: CNBC