Asia report: Markets play waiting game ahead of Fed

Markets in Asia closed lower on Wednesday, ahead of key central bank announcements out of the US, Japan and New Zealand.

Japan’s Nikkei 225 finished 0.36% lower at 17,240.49.

The yen traded around the 111 mark against the greenback for much of the day, and remained flat after Tokyo closed at JPY 111.31 per USD.

Many observers are expecting easing from the Bank of Japan this week, with Nikko Asset Management chief global strategist John Vail saying it will likely start a targeted longer-term refinancing operations programme in a similar vein to the European Central Bank.

Banking stocks in the country were mixed, with Mitsubishi UFJ down 1.41% and SMFG off 1.49%, while Mizuho Financial added 0.22%.

The major exporters dropped on the yen’s strength. Toyota lost 1.75%, Honda 1.33% and Nissan 0.43%.

On the mainland, the Shanghai Composite slid 0.36% at 2,954.00, while the Shenzhen Composite lost 0.29% to close at 1,876.51.

Korea’s Kospi was down 0.21% at 2,015.40, while in Hong Kong the Hang Seng Index lost 0.21% at 21,361.60. Taiwan’s Taiex slipped 0.22% at 8,563.05.

Volumes were down across most markets as analysts observed investors holding on to their wallets ahead of the Federal Reserve, Bank of Japan and Reserve Bank of New Zealand decisions.

"The Mighty Fed's decision this week will likely lay the groundwork for dollar fortunes through 2016," said Stephen Innes, a senior trader for Asia Pacific at OANDA.

Oil prices extended their US-led gains during Asian trading. Brent crude was last up 2.29% at $46.81 per barrel, while West Texas Intermediate added 2.02% to $44.95.

The American Petroleum Institute reported a decrease of 1.1 million barrels in US crude inventories last week, against a 2.4 million barrel forecast increase.

Down under, the S&P/ASX 200 reversed early gains to close down 0.63% at 5,187.70, weighed down by financials and energy. The financials sub-index dipped 1.17% as the region’s big four banks sold off sharply.

Australia and New Zealand Banking Group, Commonwealth Bank of Australia, National Australia Bank and Westpac all closed down between 1.53% and 2.46%.

Data from the country’s Bureau of Statistics out during the session showed the headline consumer price index falling 0.2% in the first quarter, due to falling fuel and food prices. Annual inflation slowed to 1.3%, from 1.7% in the December quarter.

Energy equities in the sunburnt country were mixed, with Santos advancing 2.02% and Oil Search adding 0.14%, while Woodside Petroleum dropped 2.83%.

The major miners were all down, with Rio Tinto, Fortescue and BHP Billiton losing between 0.56% and 2.86%.

Equities in New Zealand fell ahead of the central bank meeting on Thursday, with the S&P/NZX 50 losing 0.7% to close at 6,750.41.

"Markets have no idea what the Reserve Bank's going to do. They're quite split on whether they'll cut or hold fire, so the fact that there's a lot of uncertainty about the approach they'll take is probably weighing," said Craigs Investment Partners head of private wealth research Mark Lister.

The biggest loser was F&P Healthcare, which lost 3.3% as the Kiwi dollar maintained it strength against the greenback. The breathing device manufacturer is highly exposed to the currency pair.

New Zealand’s dollar had pulled back from earlier highs after market close, and was last trading 0.72% weaker at NZD 1.4598 per USD.

The Aussie also lost ground, and was last 1.86% weaker at AUD 1.3147.