Asia-Pacific markets mostly decline as investors turn cautious

  • Asia-Pacific markets fell Friday as investor sentiment turned cautious, following an overnight selloff stateside.
  • In the currency market, the dollar erased most of its losses seen after the Fed decision on Wednesday.
  • Overnight, oil prices collapsed on the back of demand recovery expectations and a relatively stronger U.S. dollar.

SINGAPORE — Asia-Pacific markets fell Friday as investor sentiment turned cautious, following an overnight selloff stateside.

Australian shares traded lower, with the benchmark ASX 200 down 0.31% — the index retraced some of its earlier losses of more than 1%. The energy and materials sectors were down 1.39% and 0.98%, respectively, while the heavily-weighted financials subindex was near flat.

The Nikkei 225 in Japan declined 0.86% while the Topix index was down 0.37%.

South Korea's Kospi fell 0.89% and the Kosdaq was down 0.16% as tech names sold off. Shares of Samsung Electronics fell 0.97%, SK Hynix declined 2.11% and LG Electronics lost 1.61%.

In Hong Kong, the Hang Seng index fell 1.16% while Taiwan's Taiex was down 1.45%.

Chinese mainland shares also declined: The Shanghai composite was down 1.04% and the Shenzhen component lost about 1.71%.

The stock market on Wall Street struggled overnight, where tech shares were hit hard while the Dow and S&P 500 also declined. That weakness in shares was mirrored by an uptick in bond yields.

Yields move in the opposite direction to prices. Rising bond yields typically signal confidence about economic recovery and fears about inflation, which can make high growth stocks appear less attractive to investors.

"It was a mixed session for risk assets overnight as bond yields pushed higher in the aftermath of the FOMC meeting," analysts at ANZ Research wrote in a Friday morning note. "The Fed will wait for evidence of stronger data before raising their fed funds forecasts. This saw market measures of inflation expectations rise, sending bond yields up."

Currencies and oil

In the currency market, the dollar traded near flat at 91.884 against a basket of its peers. Overnight, the greenback erased most of its losses seen after the Fed decision on Wednesday.

"The Federal Reserve has no plans to raise interest rates until 2023 but the recovery in the dollar and rise in Treasury yields tell us that investors continue to be drawn to the economy's positive outlook," Kathy Lien, managing director of foreign-exchange strategy at BK Asset Management said in a Thursday note.

Lien explained that the Fed will not be able to keep the U.S. dollar down "because vaccine rollout and stimulus checks will make for strong second quarter and second half recovery."

The Japanese yen changed hands at 109.02 per dollar, weakening from an earlier level around 108.87. The Bank of Japan is set to conclude its two-day monetary policy meeting on Friday and reports suggested the central bank is expected to widen a band at which it allows long-term interest rates to move around the 0% target.

The Australian dollar slipped 0.24% to $0.7737.

Oil prices reversed course on Friday during Asian trading hours, following a sharp drop in the previous session. U.S. crude erased earlier losses to trade up 0.13% at $60.08 while global benchmark Brent retraced declines to trade up 0.28% to $63.46.

Overnight, prices tumbled close to 7% or more for both U.S. crude futures and Brent.

"Crude oil prices collapsed as concerns over weaker demand in the short term deepened," the ANZ analysts wrote. "Following recent updates from IEA, EIA and OPEC, growth in oil demand looks likely to remain well below previously optimistic forecasts. This comes amid mixed economic data."

The stronger U.S. dollar also likely weighed on investor appetite in the sector.

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