Asia report: Forward Fed sends markets into red

Most Asia markets went lower on Thursday, after the Federal Reserve released its April minutes, increasing the prospect of an interest rate hike.

The Nikkei 225 ended the session flat, notching just a 0.01% gain to 16,646.66 after retracing earlier gains of more than 1%.

Yen was pushed weaker as the greenback rose, though it regained some strength after Tokyo closed and was last 0.16% stronger at JPY 110.01 per USD.

Major bank Mitsubishi UFJ was egged on by the Fed minutes, rising 0.82%.

Carmaker Suzuki managed a 3.54% increase after plummeting 9.37% on Wednesday, after it confirmed reports that it had used the wrong type of fuel economy test on domestic models in Japan.

In China, the Shanghai Composite was also flat, down 0.18% at 2,807.33 after spending much of the session dipping above and below the waterline.

The Shenzhen Composite fared better, adding 0.56% to finish at 1,775.88.

Banking shares were in the spotlight on the mainland, after Deutsche Bank said it was growing more concerned by shadow credit funded or channeled by the banks.

It said the funds were basically corporate loans that were not seen in the banks’ loan books, and it expected Beijing to clamp down on the practice soon.

Deutsche downgraded China Minsheng Bank’s A-shares to ‘sell’ and its Hong Kong shares to ‘hold’, leading to declines of 1.53% on the mainland and 0.14% in Hong Kong for the bank.

Hong Kong’s Hang Seng Index lost 0.67% to 19,694.33, while South Korea’s Kospi lost 0.51% to 1,946.78.

The special administrative region’s most significant financial institution, HSBC, was pushed up 3.21% after the Fed minutes.

"Markets are playing catch up to communications from the US Federal Reserve as they appear to have dramatically underpriced the likelihood of a rate rise over the coming months," noted IG market analyst Angus Nicholson.

Markets were surprised by the forwardness of the Fed’s rhetoric in its April minutes overnight on Wednesday, in which it laid out its intention to raise interest rates rather clearly.

"Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the Committee's 2 percent objective, then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June," the minutes said.

Crude prices were still falling as Asia went to bed, with Brent crude last don 2.54% at $47.72 per barrel and West Texas Intermediate losing 2.18% at $47.16.

In Australia, the S&P/ASX 200 was down 0.61% at 5,323.30, with a small 0.1% gain in the weighty financials subindex more than offset by serious declines in energy and materials.

The big banks were lifted after the Fed minutes came out, with Australia and New Zealand Banking Group logging a 0.85% increase.

Energy and mining stocks lost ground after prices fell, however, with Woodside Petroleum losing 1.17%, and BHP Billiton and Rio Tinto both out by more than 3%.

New Zealand shares fell from their all-time high, with the S&P/NZX 50 losing 1.1% to 6,903.63.

Infrastructure and energy shares were the losers of the day, with AIAL and Infratil losing 4.2% and 2.8%, and Meridian Energy and Genesis Energy falling 3.8% and 3.3% respectively.

The surging greenback was bad news for one of the down under dollars, with the Aussie last 0.3% weaker at AUD 1.3873 per USD, though the Kiwi marched ahead by 0.28% to NZD 1.4796.