Asia report: Fed jitters and Brexit fears send markets lower

Markets in Asia finished sharply lower on Monday, with a number of central bank meetings this week sending jitters through the market, along with mounting fears of Brexit ahead of the UK’s vote on its membership of the European Union.

In Japan, the Nikkei 225 lost 3.51% to 16,019.18, with investors rushing to safe haven of the yen and pushing the currency stronger.

It was last 0.98% stronger at JPY 105.92 per USD.

Shares in the major exporters all closed down on the strength of the yen, with Honda, Nissan, Toyota and Sony all closing down between 3.54% and 4.18%.

Domestic concerns were centering on the Bank of Japan’s two-day policy meeting starting on 15 June, with global jitters about the impact of a Brexit adding to worries.

“The BoJ will likely delay a rate cut in the meeting, favoring a coordinated event when the government releases its fiscal stimulus package in Autumn,” said OANDA Asia Pacific senior foreign exchange trader Stephen Innes.

“This delay will likely appreciate the yen over the short term if the BoJ remains sidelined.”

On the mainland, the Shanghai Composite Index was off 3.23% at 2,832.50, with the Shenzhen Composite sliding 4.75% to 1,827.35.

Official data released early on Monday showed China’s fixed asset investment growth as easing to 9.6% year-on-year in the January-May period, likely impacting investor confidence in the People’s Republic,

Analysts polled by Reuters had anticipated investment growth of 10.5% for the period.

In Korea, the Kospi was down 1.91% at 1,979.06, while Hong Kong’s Hang Seng Index lost 2.52% to finish at 20,512.99.

On the Korean corporate front, Hotel Lotte - part of the Japanese-Korean Lotte Group conglomerate - announced the withdrawal of its initial public offering plan and postponement of its listing.

The IPO was expected to raise up to $4.5bn, but last week Lotte’s offices were raided as part of an ongoing investigation into the company.

Shares of conglomerate stablemate Lotte Shopping were down 5.38% by closing time in Seoul.

The prospect of Brexit - a United Kingdom exit from the European Union, if voters choose to do so on 23 June - was certainly on Asia’s radar as the referendum loomed closer.

“We judge that market uncertainty will remain elevated all the way into the Brexit referendum next week, as it is becoming clear that support for both camps are near evenly divided,” said Mizuho Bank foreign exchange strategist Wei Liang Chang.

“Perceived negativity of a Brexit event should keep risk positioning light, and we expect a continued pare back of risk assets in Asia, to an extent.”

A surprise poll result released by the Independent after London markets closed on Friday showed 55% support for Britain leaving the EU, and 45% in favour of staying.

The online publication said it was the largest proportion of poll respondents in favour of Brexit since its research firm ORB began polling for it last year.

The Federal Open Market Committee is also beginning a two-day policy meeting on 14 June, weighing on market jitters, with many market watchers no longer expecting a rate hike after nonfarm payrolls took a serious hit.

In contrast to the nonfarm numbers, the number of Americans filing for unemployment benefits for the week to 4 June falling unexpectedly according to the Labor department.

Another development weighing on investor sentiment was the killing of at least 50 people at the hands of a lone gunman in Florida on Sunday, in what was the largest such mass shooting in United States history.

Local officials have described it as an incident of domestic terrorism, naming the perpetrator as New York native Omar Mateen, and citing a 911 call in which he pledged allegiance to the so-called Islamic State.

Crude prices began let go of last week’s stranglehold on the $50 mark during Asian trading, although Brent crude was last just hanging on, down 0.9% at $50.09 per barrel, with West Texas Intermediate down 1.18% at $48.50.

Markets in Australia were closed on Monday for the country’s Queen’s Birthday celebrations, while in New Zealand the benchmark S&P/NZX 50 fell 0.7% to close at 6,924.27 in quiet trading, with the Sydney closure affecting volumes.

The down under dollars were gaining on their American cousin, with the Kiwi 0.2% stronger at NZD 1.4144 per USD and the Aussie 0.41% stronger at AUD 1.3506.