Asia report: Markets lose steam and yen races towards dollar

Record closing levels in the US failed to blow steam into Asia on Tuesday, with Japan particularly slumping as the yen saw renewed strength.

The Nikkei 225 lost 1.62% to 16,596.51, while the Topix fell 1.38% to close at 1,298.47.

Both indexes were dragged by a strong yen, which was last trading 0.92% closer to the greenback at JPY 100.33 per $1.

“What a dollar/yen at 100, or potentially lower, is telling us is the market does not believe that the Bank of Japan is likely to be successful in reflating the economy,” Standard Chartered Wealth Management head of FICC strategy Manpreet Gill told CNBC.

“This could eventually lead to more extreme policy events down the line, but in the short term, it's quite possible the dollar/yen moves lower rather than higher.”

The stronger currency saw the major exporters sell off during the session, with Nikon losing 2.83%, Nissan down 1.73% and Toyota off 1.26%, although Fujitsu went against the grain to finish up 2.88%.

Markets on the mainland were mixed, with the Shanghai Composite closing 0.47% lower at 3,110.47, while the Shenzhen Composite added 0.67% to finish at 2,036.80.

China Evergrande Group was reported to have increased its holding in housebuilder China Vanke to 7%, having purchased another 2.14% on Tuesday.

Vanke’s Shenzhen-listed shares added 10.02% during the session, while its Hong Kong shares closed up 2.93%.

Traders in Seoul returned from a long weekend for Liberation Day, with the Kospi losing 0.13% to 2,047.76, while further south Hong Kong’s Hang Seng Index dropped 0.09% to 22,910.84/

Oil prices lost their puff during Asian hours, though they started to claw back as the region went to bed and Europe took the trading baton.

Brent crude was last ahead 0.19% at $48.44 per barrel, and West Texas Intermediate added 0.41% to $45.93.

Market feelings around the sticky black stuff was boosted late in the day by speculation that oil producers might pull their socks up and deal with the global supply glut.

Fresh data from Genscape also showed an estimated drawdown of more than 350,000 barrels at the Cushing delivery point for crude in the United States last week.

Not everyone was positive about the likelihood of consensus among producers, however, with IG’s Angus Nicholson saying Saudi Arabia is happy to commit to an OPEC supply freeze - but only if Iran does the same.

“And Iran refuses to agree to any deal that will inhibit them from lifting their oil output to pre-sanctions level,” he said.

Australia’s S&P/ASX 200 fell 0.14% to 5,532.00, although both energy and gold beat the other subindexes to close 1.1% and 1.3% higher respectively.

Of the major energy players, Santos added 2.51% during the session and Woodside Petroleum closed up 0.95%.

Sydney’s exceptionally weighty financials subindex dragged general sentiment down as it fell 0.26%, however.

After markets closed, BHP Billiton reported its worst ever loss at $6.39bn for the year to 30 June, compared with a $1.91bn profit a year ago.

Its shares had finished the session 0.45% higher, before the news was delivered.

The Sydney and London-listed miner said it would still pay a final 14c per share dividend.

New Zealand shares were also in the red, with the S&P/NZX 50 losing 1.1% to settle at 7,310.67, led lower by some of the country’s largest firms ahead of earnings reports later this week.

Fletcher Building fell 2.4% ahead if its annual results on Wednesday, which are expected to show a 0.8% rise in profit and 3.7% revenue growth.

Former telecommunications monopoly Spark led the index lower, however, losing 2.6% as it came out publicly opposing a tie-up between two of its largest rivals, and ahead of its earnings report on Thursday.

Spark revealed its concerns about the pending merger between Vodafone’s New Zealand operations and subscription broadcaster Sky - not related to the UK firm of the same name.

The merger had received the approval of Sky shareholders, but still required the nod of the country's Commerce Commission, which oversees competition issues.

Vodafone shares were sent into a tailspin on the London markets when the deal was first announced earlier this year.

The down under dollars were both stronger against the greenback, with the Aussie last 0.65% closer at AUD 1.2947 per $1 and the Kiwi gaining 1.06% to NZD 1.3726.