Asia: Equities decline as oil drops and Fed rate hike looks increasingly certain

Most Asian stocks declined on Thursday, amid a decline in oil prices and strengthened expectations the US Federal Reserve will raise interest rates later this month.

The Shanghai Composite Index bucked the trend as it rose 1.35%, after a private index of China’s services sector remained in positive territory in November, although it expanded at a slightly slower pace than in the previous month.

The Caixin non-manufacturing purchasing managers’ index (PMI) fell from 52 to 51.2 last month, while the composite PMI rose from 49.9 to 50.5

Elsewhere, Hong Kong’s Hang Seng Index lost 0.28%, while South Korea’s Kospi and Australia’s S&P/ASX 200 declined 0.76% and 0.58% respectively, with the latter dragged down by energy stocks after US crude oil fell below $40 a barrel for the first time since August.

Oil-linked stocks where under pressure, with Woodside Petroleum shedding 3.79%, while Oil Search lost 2.17%.

Materials shares were also on the back foot, with miners BHP Billiton and Rio Tinto falling 2.99% and 2.06% respectively.

Japan’s Nikkei Stock Average, meanwhile, closed flat after figures released earlier in the session showed the country’s services sector slowed down in November.

The Markit/Nikkei final services purchasing managers’ index fell from 52.2 in October to 51.6, although it remained above the 50 threshold that indicates expansion for the eight consecutive month.

The sub-index tracking new business declined from 51.8 to 51.6, although the outstanding business component of the PMI index rose from 51.2 to 51.4.

“A combination of new order growth and a drop in staff numbers consequently led to overcapacity and an increase in work outstanding,” said Markit’s economist Amy Brownbill.

“Despite this, service providers remain upbeat towards output growth over the next 12 months, with business sentiment picking up from October’s five-month low.”

On the currencies front, the yen declined 0.18% against the dollar, after the greenback was driven higher by comments from Fed chairwoman Janet Yellen, who said the US economy was strong enough to sustain an interest rates hike.

Meanwhile, the Australian dollar gained 0.34% against its US counterpart, while the Chinese yuan declined 0.13% against the dollar.