Asia report: Markets mostly lower as North Korea agitates

Markets in Asia ended mostly lower on Friday, as investors expressed their disappointment at the European Central Bank’s Thursday decision, while North Korea claimed a fifth nuclear test.

In Japan, the Nikkei 225 finished virtually flat, adding 0.04% to 16,965.76.

The yen was relatively stronger against the greenback, and was last 0.3% ahead at JPY 102.18.

Mainland markets fell towards the end of the trading day, having hovered around the line for much of the session.

The Shanghai Composite lost 0.55% to settle at 3,078.85, while the Shenzhen Composite was off 0.73% at 2,035.02.

In fresh data out of Beijing, inflation in China grew at its slowest pace since October 2015 in August.

Consumer price inflation rose 1.3% year-on-year, against expectations for a 1.7% rise and well below the 1.8% spike seen in July.

In South Korea, the Kospi list 1.31% to 2,037.87, after North Korea claimed to have tested a miniature nuclear warhead, citing “threats and sanctions from hostile elements”.

The nuclear test in the Democratic People’s Republic came a day after the politburo there reportedly banned sarcastic comments about leader Kim Jong-Un.

Samsung was also dragging the Kospi, with its stock falling 4.2% after the Federal Aviation Administration issued special safety instructions for its Note 7 smartphone.

Passengers in the US have been asked not to turn on or charge their Note 7 devices during flights, or to stow them in checked bags, over fears the fire-prone batteries could cause an in-flight disaster.

The Bank of Korea stood pat on interest rates, holding them at 1.25% for the third month in a row as expected.

Hong Kong’s Hang Seng Index managed to buck the regional trend, closing up 0.75% at 24,099.70.

It came after reports that Beijing regulators were allowing mainland insurers to participate in the Shanghai-Hong Kong stock connect programme.

Financial stocks were the winners in the special administrative region on Friday, with Bank of East Asia adding 2.89%, Bank of China up 1.91% and HSBC rising 0.8%.

Oil prices turned back to declines during Asian hours, after soaring in the US on Thursday.

That rise came after the Energy Information Administration said crude stockpiles were drawn down by 14.5 million barrels last week - the largest weekly drop since January 1999.

“The record drop is being further propelled by oil production disruptions from storms in the Gulf [of Mexico],” said easyMarkets chief market strategit Anthony Darvall.

“Markets have realised that the lack of supply is real and fundamentally driven, which will help the oil price over the short-term at least.”

Brent crude was last down 1.48% at $49.26 per barrel, and West Texas Intermediate lost 1.41% to $46.96.

Traders in Asia reacted early to the European Central Bank’s decision on Thursday not to extend its bond-buying programme’s deadline.

The ECB also lowered its inflation and growth forecasts for 2017 and 2018, sending sentiment southwards.

“Yesterday's no-change stance, however, does not diminish the need for further easing,” noted DBS Bank economist Radhika Rao.

“"But there was no explicit mention of fresh measures under consideration, spurring a knee-jerk negative reaction in the markets.”

Australia’s S&P/ASX 200 lost 0.86% to 5,339.20, with the weighty financials subindex dragging the benchmark as it lost 1.38%, though the energy and materials sectors partially offset this.

In New Zealand, the S&P/NZX 50 lost 0.9% to close at 7,468.59, led by ecommerce platform Trade Me, which lost 6.7%.

Both of the down under dollars were weaker on the greenback, with the Kiwi off 0.28% at NZD 1.3554 and the Aussie losing 0.34% to AUD 1.3128 per $1.