Asia report: Markets mainly positive, airlines suffer

Most markets in Asia ended Friday in the green, despite hawkish commentary from the US Federal Reserve flowing across the Pacific.

In Japan, the Nikkei 225 added 0.54% to finish at 16,736.35, reversing losses earlier in the session.

The yen notched up new strength against the greenback during the session as some investors moved their chips over to the safe-haven currency.

It lost some ground as the region entered the weekend, and was last 0.26% weaker at JPY 110.25 per USD - still stronger than some of the levels seen on Thursday.

Airline shares in Asia - like others around the world - performed poorly on Friday in the wake of the EgyptAir MS804 crash in the Mediterranean sea.

Japan Airlines fell 1.2% by the closing bell, though its southern competitor Singapore Airlines managed a 0.47% gain.

Markets on the mainland finished Friday ahead, with the Shanghai Composite Index up 0.68% at 2,825.94, and the Shenzhen Composite up 1.07% at 1,794.95.

In Hong Kong, the Hang Seng Index finished the day 0.8% higher at 19.852.20, while South Korea’s Kospi managed a 0.89% gain after spending much of the day bobbing above and below the waterline.

Hong Kong-based airline Cathay Pacific was up 2.36% - the carrier is relatively protected from currency-driven rises in oil prices as the Hong Kong dollar is pegged to the greenback.

As the region's markets steamed ahead, analysts painted the lack of reaction to the possibility of a June rate hike in the US as one of ambivalence towards the Fed.

“People are already starting to wonder how much truth there is to a summer rate hike, or if it is one of the Fed's countless charades," noted Julius Baer head of Asia research Mark Matthews.

“They don't want people to think there will never be a rate hike, so they have to have the threat of one out there.”

Despite the market reaction, Federal Reserve officials were still loud and clear about their possible intentions for June.

New York Fed president William Dudley described June as a live meeting, and expressed his pleasure that market expectations for a rate hike in June or July had shifted north.

Richmond Fed president Jeffrey Lacker went even further, telling Bloomberg Radio he is comfortable with four rate increases in 2016.

The comments came after the release of the Fed’s April meeting minutes, which were much more hawkish than recent rhetoric from the central bank on the subject of rate hikes.

Oil continued to gain through the session and into the Asian night, with Brent crude last up 0.23% at $48.91 and West Texas Intermediate up 0.31% at $48.82 per barrel.

Down under, the S&P/ASX 200 finished up 0.53% at 5,351.30, underpinned by gains in energy and materials.

Woodside Petroleum added 0.33% by the end of the day, and Santos was ahead 2.6%.

One of the country’s major airlines Virgin Australia was down 1.75% after the EgyptAir crash and recent weakness in the Aussie dollar.

In New Zealand, the benchmark S&P/NZX 50 was up 0.09% to 6,909.86, led by subscription television provider Sky (not related to the UK-based firm).

The company dropped 26% earlier in the month after it revealed serious and ongoing falls in subscriber numbers as viewers cancelled their service after the end of the Rugby World Cup, and moved to online streaming competitors.

Air New Zealand - the country’s largest airline and the biggest shareholder in Virgin Australia - shed 2.24% after the MS804 crash, and with recent weakness in the Kiwi dollar adding to local fuel prices.

The colonial currencies, which had been weaker against the greenback in recent days, made gains on Friday, with the Kiwi last 0.28% stronger at NZD 1.4790 per USD and the Aussie ahead by 0.08% at AUD 1.3827.