Asia report: Markets mixed as RBA keeps rates at record low

Equity markets in Asia closed in a mixed state on Tuesday, as investors kept an eye on rising oil prices, and Australia’s central bank sated expectations by standing pat on interest rates.

In Japan, the Nikkei 225 was up 0.16% at 28,643.21, as the yen strengthened 0.16% against the dollar to last trade at JPY 110.79.

Of the major components on the benchmark index, robotics specialist Fanuc was up 0.39%, Uniqlo owner Fast Retailing added 0.45%, and technology giant SoftBank Group was ahead 1%.

The broader Topix index was 0.28% firmer by the end of trading in Tokyo, closing at 1,954.50.

On the mainland, the Shanghai Composite was 0.11% weaker at 3,530.26, and the smaller, technology-centric Shenzhen Composite lost 0.32% to 2,406.59.

South Korea’s Kospi was 0.36% higher at 3,305.21, while the Hang Seng Index in Hong Kong fell 0.25% at 28,072.86.

The blue-chip technology stocks were stronger in Seoul, with Samsung Electronics up 1% and SK Hynix rising 1.63%.

Oil prices were higher as the region went to bed, with Brent crude last up 0.18% at $77.30 per barrel, and West Texas Intermediate rising 0.03% to $76.36.

The ongoing rise in prices for the thick black stuff came after talks between OPEC and its allies were indefinitely suspended after they failed to reach a deal on production beyond the end of July.

“The key question is whether such a move will result in higher or lower oil prices in the medium to long term,” said FXTM senior research analyst Lukman Otunuga.

“If things are left in limbo with no deal reached, this may result in the group keeping output unchanged in August and the rest of 2021.

“Such a scenario could see higher oil prices.”

However, Otunuga posed that if the infighting meant no OPEC+ deal by April next year, that could result in a “free-for-all”, as major oil producing nations pumped at-will.

“If this is anything like what we witnessed in the 2020 price war with Saudi Arabia and Russia, oil prices would experience a steep selloff.”

In Australia, the S&P/ASX 200 was down 0.73% at 7,261.80, after the Reserve Bank of Australia met market expectations by keeping the cash rate target at a record low 0.1%.

“The bond purchase programme is playing an important role,” the Reserve Bank said in its release.

“The bank will continue to purchase bonds given that we remain some distance from the inflation and employment objectives.

“However, the board is responding to the stronger-than-expected economic recovery and the improved outlook by adjusting the weekly amount purchased.”

The central bank reiterated that it would not increase the cash rate until actual inflation was sustainably within the 2% to 3% target.

“The bank’s central scenario for the economy is that this condition will not be met before 2024.”

The country’s big four banks ended the session on the back foot in Sydney, with Australia and New Zealand Banking Group down 0.25%, Commonwealth Bank of Australia off 0.56%, National Australia Bank losing 0.19%, and Westpac Banking Corporation 0.31% weaker.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 was down 0.42% at 12,758.93, led lower by airport operator AIAL, which fell 3.2% as it gave back some of its gains from Monday.

Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.65% at AUD 1.3195, and the Kiwi advancing 0.81% to NZD 1.4118.