Asia report: Shares fall as Japan approves stimulus, Australia cuts rates

Japan’s Nikkei 225 fell 1.47% to 16,391.45, as local markets eagerly awaited details of the country’s much-anticipated mammoth stimulus package.

The yen strengthened against the US dollar after markets closed, and after the Japanese cabinet approved the stimulus package, and was last 0.67% ahead at JPY 101.70 per $1.

It was trading as high at JPY 106 against the greenback before the Bank of Japan revealed its smaller-than-expected monetary stimulus last week.

Shinzo Abe’s government approved JPY 13.5trn of his promised JPY 28trn fiscal stimulus package announced last week.

The yield on the 10-year Japanese government bond rose to -0.009% during the session, with the sell-off in bonds possibly driven by the Bank of Japan’s decision not to increase purchases of the government debt in its monetary stimulus announcement last week.

In the package, the central bank did increase its purchase of exchange-traded funds, but stood pat on interest rates and its levels of government bonds purchases.

On the mainland, the Shanghai Composite added 0.59% to 2,970.92 and the Shenzhen Composite climbed 0.73% to 1,926.69.

South Korea’s Kospi lost 0.52% to 2,019.03, while Hong Kong’s markets remained closed as the city battened down ahead of a looming typhoon.

Oil prices fell further in Asian trading, though they soon turned around as the region went to bed, with Brent crude last up 0.92% at $42.53 per barrel and West Texas Intermediate adding 0.74% at $40.36.

In Australia, the S&P/ASX 200 lost 0.84% to 5,540.50, with shares refusing to react to a decision from the central bank to cut rates to a fresh record low 1.5%.

The energy subindex lost 3.21% as oil prices fell lower, with US crude futures dipping below $40 per barrel for the first time in four months overnight.

After the cash rate cut from the Reserve Bank of Australia, the Aussie dollar pared its losses against the greenback and was last 0.5% closer at AUD 1.3204 per $1.

In his policy statement, governor of the central bank Glenn Stevens noted the slow pace of growth in the global economy and the difficulty many emerging markets were facing.

He added that low wage and cost inflation was contributing to an extended period of low domestic inflation, with Australia’s latest quarterly CPI rising 1% in the three months to June.

“With inflation low, there was little standing in the way of the RBA cutting its cash rate further to support more growth and help to return inflation to target sooner than otherwise,” said HSBC Australia and New Zealand chief economist Paul Bloxham.

Data released during the day by the Australian Bureau of Statistics showed Australia’s trade deficit as being much wider than expected, at AUD 3.19bn against the AUD 2bn among economists polled by Reuters.

Seasonally-adjusted exports fell 1% month-on-month in the country, while imports were up 2%.

In New Zealand, the S&P/NZX 50 slipped from its record close on Monday, down 0.4% to 7,329.19, with many local analysts looking across the Tasman Sea to the fresh Australian rates cut as applying pressure on the Reserve Bank of New Zealand to do the same at its policy meeting this month.

The Kiwi surged against its major pairs as expectations for a rate cut grew, and it was last 0.49% stronger against the greenback at NZD 1.3874.