Asia report: Markets trip up on greenback's strength

Asian markets tripped and fell on the last trading day of the week, with a stronger greenback dragging on commodities prices and Japan’s benchmark bond yield hitting a record low.

In Japan, the Nikkei 225 lost 0.4% to finish at 16,601.36, with the yen maintaining its strength relatively against the dollar.

It was last trading 0.23% stronger at JPY 106.85 per USD.

Bonds were in hot demand, with the ten year Japanese government bond yield fell to -0.147 by the end of the session, dropping as low as -0.15 earlier in the day.

A number of analysts say they expect the Bank of Japan to announce further easing measures after its next policy meeting ends on 16 June next week, which could include more bond purchases.

Bank equities in Japan were also mainly lower, with the low yields of the government bonds they’re legally required to hold cited as a reason.

There was also the potential for a rate cut from the Bank of Japan, with any movement deeper into negative territory hurting the profit margins of banks.

Shinsei Bank lost 1.86% and SMFG was down 1.33% by end-of-play.

The major exporters in the country closed mixed, with Nissan adding 0.19% and Toyota finishing 0.43% higher, while Sony was off 0.75%.

In South Korea, the Kospi fell 0.32% to 2,017.63, while in Hong Kong, the Hang Seng Index returned from a national holiday to close 1.2% down at 21,042.64.

Korean shipbuilder Daewoo Shipbuilding & Marine Engineering added 2.96% after reports that it has secured a $580m order to build four carriers for a Greek shipping line.

Shares in the Seoul-based Korean-Japanese conglomerate Lotte were under pressure after investigators raided its headquarters on Friday morning as part of an unspecified “investigation”.

Lotte Shopping dropped 1.55% in Seoul and Lotte Himart was down 2.12%.

The won weakened against the stronger dollar, and was last 0.81% behind the greenback at KRW 1,165.30.

Markets in mainland China and Taiwan remained closed on Friday for the second day of the Dragon Boat Festival.

Investors continued their profit-taking from oil as a relatively stronger dollar continued to push prices down during Asian trading, though they managed to hold above the $50 mark for most of the day.

Brent crude was last down 1.52% at $51.17 per barrel, while West Texas Intermediate lost 1.63% at $49.75.

A number of dollar-denominated commodities suffered overnight before Asian markets opened, on the renewed strength of the greenback.

Three month copper on the London Metal Exchange fell 1.4% to $4,156 per tonne on Thursday, according to Reuters.

“This dollar spike has sent jitters through the commodities complex with copper, in particular, having an awful night," said IG market analyst Angus Nicholson.

“LME copper prices hit their February lows, as LME copper inventories look to have seen a massive influx from Chinese copper inventories.”

Down under, the S&P/ASX 200 finished down 0.92% at 5,312.60, with declines of more than 1% in the energy, financials and materials subindexes.

Local analysts said the weakness was a likely result of the drop in commodity prices overnight after strengthening in the US dollar.

The ‘Big Four’ Australasian banks - Australia and New Zealand Banking Group, Commonwealth Bank of Australia, National Australia Bank and Westpac - all have high exposure to the resources sector, and all finished down between 0.86% and 1.29%.

In the energy sector, Santos lost 1.87% and Oil Search was off 1.71%, while Woodside Petroleum shares slipped 1.28%.

Earlier in the week, Credit Suisse downgraded Woodside to ‘underperform’ from ‘neutral’, explaining that it saw the majority of risks on the downside.

“It is hard to find a positive catalyst outside of the oil price,” Credit Suisse analysts noted.

The major miners also all closed lower, with BHP Billiton falling 4.13%, Fortescue Metals losing 1.53% and Rio Tinto down 2.99%.

BHP was especially punished after reports that Brazil’s federal police have completed a criminal investigation into a dam burst last November at a mine run by a joint venture between itself and Vale.

It’s understood the police are accusing the venture and its two owners, and eight employees, of a number of crimes including wilful misconduct.

Air carrier Virgin Australia leapt 3.57% after it was revealed its largest shareholder, Air New Zealand, has agreed to sell its stake in the airline to China’s Nanshan Group.

Over in New Zealand, the S&P/NZX 50 inched forward by 0.02% to close at 6,971.78.

Air New Zealand gained 2.3% on the Wellington bourse after it announced the sale of its Virgin Australia stake to Nanshan, which owns Qingdao Airlines.

The majority-state owned flag carrier said it was still considering options for the 2.5% it still holds in Virgin.

Television operator Sky (unrelated to the London-based company of the same name) was the market’s worst performer, down 3.4%, after Vodafone announced it was combining its New Zealand operation with Sky in a deal giving Vodafone control of the TV company.

That announcement sent Vodafone shares plummeting in London on Thursday, and dragged the entire European telecoms sector down on the Stoxx 600.

The stronger US dollar had minimal effect on the Kiwi, which was last 0.04% weaker at NZD 1.4079, while the Aussie weakened sharply and was last 0.42% behind at AUD 1.3512.