Investors were cashing out gain made recently before the announcement of highly anticipated US employment figures due on Friday as that could provide clues about when the Federal Reserve will reduce its stimulus program.
The focus will be on the U.S. ADP employment report on economic conditions in the world's largest economy, which will be the last major jobs data release before Friday's payrolls.
While most investors expect the U.S. Federal Reserve to start scaling back its bond-buying program sometime early next year, some are now worried that stronger-than-expected U.S. jobs data could increases probability of reducing FED's aggressive bond buying program from December month meeting, as FED signalled that US central bank is on the way of tapering its stimulus as economy shows sustainabilty of growth. The Fed has said it will monitor labor-market gains before deciding when to pare its $85 billion of monthly bond purchases.
The Federal Open Market Committee (FOMC) holds a two-day policy meeting on interest rates in the United States on 17-18 December 2013. The US central bank currently buys bonds worth $85 billion a month in a bid to hold interest rates low and encourage economic growth in the world's biggest economy. Fed's bond-buying program has been a source of liquidity for most Asian and emerging markets this year. Minutes of the Fed's October meeting released on 20 November 2013 showed officials may reduce their $85 billion a month of bond buying if the economy improves as anticipated.
The Fed's stimulus has shored up global stock markets over the past few years. So-called "tapering" of that stimulus could work the opposite way, even though it would be predicated on an improving U.S. economic outlook, may result heavy sell off in global markets.
Among Asian bourses, shares in the Japanese financial market tumbled, dragging down the benchmark Nikkei Stock Average by 341.72 points to 15407.94. The selloff in Tokyo market came as investors withdrew cash off the table after the market climbed to highest level in six years previous day. Meanwhile rise in Japanese yen against the greenback further intensified selloff. The dollar bought 102.56 yen in afternoon forex trade, little changed from 102.48 yen in New York Tuesday but well down from 103.25 yen in Asia.
Export related shares were biggest retreat in the Tokyo market due to hardening of Yen against the US dollar. Shares of Kyocera Corp. fell 3.8% to 5260 yen and Honda Motor Co. lost 1.6% to 4230 yen.
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Sony Corp. declined 3.4% to 1845 yen after media reports that it is considering buying Renesas Electronics Corp.'s chip production plant in northern Japan as concerns over costs outweighed expectations for a potential positive impact on earnings.
Meanwhile, Seven & I Holdings outperformed, limiting its loss to 0.4% at 3750 yen following a Nikkei report that it plans to bolster its luxury clothing business by buying a significant stake in Barneys New York's Japanese business.
Japanese yen appreciated from prior day closure against the US dollar and other major currency basket on Wednesday as investors await US job data that may provide further indications as to when the Fed will start tapering. JPY appears to have shrugged comments from Takehiro Sato, BoJ board member, who said early in the morning today that more monetary easing to add stimulus to the already loose financial conditions would not raise inflationary expectations, and thus the Bank should monitor the effects of its aggressive easing at this stage. The Yen was currently trading close to 102.60 against USD, as against yesterday's lowest level of 103.38.
In Australia, shares in the Australian financial market advanced for the first time in four consecutive sessions, bolstering the benchmark S&P/ASX 200 index higher by 17.70 points to finish at 5273.80.
The advances in the Australian market came despite the latest gross domestic product data showing economic growth fell short of modest expectations. Australian Bureau of Statistics data showed that GDP grew at just 0.6% during the September quarter, lagged market consensus of 0.7% rise. Annual GDP growth is tracking at 2.3%, below Treasury's forecast for 2.5% this financial year.
Most of the sectoral heavyweights advanced in the Australian market, with shares in energy and mining companies leading the top gainers amid stronger crude oil and base metal prices, while precious metal producers were weak as bullion prices remain under pressure amidst weak investment demand.
Shares of metal and mining companies were top gainer in Sydney on the back of gain in the spot price of iron ore, landed in China, by 1% to $138.20 a tonne. On Tuesday, two of the world's biggest iron ore producers - Rio Tinto and Vale - released bullish iron ore price outlooks.
Heavyweight BHP Billiton led the bourse, gaining 1% to A$36.80. Rio Tinto added 1.2% to A$66.29 as analysts endorsed the strategy presented at the miner's investor day on Tuesday to keep costs down, reduce its debt, focus on iron ore production and plan to increase dividends. Fortescue Metals Group added 2.9% to A$5.63, while Atlas Iron jumped 7.7% to A$1.19.
Shares of energy sector climbed up on the back of stronger crude oil prices WTI had gained by 2.4% after the American Petroleum Institute reported a decline in US crude stockpiles by 12.4 mn barrels last week. Prices also found support after TransCanada Corp. announced that it will start the southern leg of its Keystone pipeline to the Gulf Coast in January 2014 that would help relieve the supply bottleneck at delivery point Cushing, Oklahoma. Meanwhile, Brent is also trading higher ahead of the OPEC meet in Vienna, due later today.
Woodside Petroleum added 1.8% to A$37.69. Santos rose 0.8% to $14.41, despite warning shareholders it expects to miss already-downgraded 2013 production guidance. However, the company said the long term outlook is strong.
Paladin Energy jumped 10.3% to A$0.48. On Monday the company said progress was being made to secure a new joint venture partners through the planned sale of a minority stake in its Langer Heinrich uranium mine in Namibia.
Shares of precious metal producers tanked in Sydney as gold prices remain under pressure amidst weak investment demand. Holdings in the SPDR Gold Trust had declined by 1.8 MT to 841.4 MT yesterday. Spot gold had fallen to a 5-month low of USD 1,215.4/oz yesterday. Gold miner Newcrest Mining fell 1.2% to A$7.16, Perseus Mining 9.4% to A$0.24 and Kingsgate Consolidated 5.3% to A$0.9.
Shopping mall operator Westfield Group climbed 4.1% to A$10.78 on the announcement it will split its operations in two, separating the Australia and New Zealand business and the international business, which has assets in the US and Britain. As part of the restructure, a related listed entity that is a vehicle for local property investments, the Westfield Retail Trust, will be merged with the Westfield Group Australia and New Zealand business. Westfield Retail Trust lost 0.3% to A$2.99.
The Australian dollar declined from yesterday closure against greenback and other major currencies on Wednesday after weaker than expected GDP figures. The downbeat GDP data release is likely to induce the RBA to maintain its dovish stance and raises the possibility of further rate cuts going ahead. AUD/USD was trading lower at around 0.9027 compared to yesterday's close of 0.9137.
In China, Chinese shares climbed to the highest level in nearly three months, with telecom, consumer discretionary, tech and industrial companies leading the way. The Shanghai Composite Index, which tracks both A and B shares, advanced 29.09 points, or 1.31%, to 2251.76.
Shares of Shanghai free trade zone-related companies rose after Zhang Xin, chief of the Shanghai headquarters of the People's Bank of China, said in a statement yesterday that government will implement liberalized financial policies in the free trade zone in one year and will promote economic development with greater opening. The central bank unveiled a raft of financial policies for the zone on Monday, outlining 30 measures to facilitate cross-border investment and transaction. Shanghai Waigaoqiao Free Trade Zone Development Co Ltd surged by the daily limit of 10% to 38.15 yuan. Shanghai International Port Co Ltd also jumped 10% to 5.04 yuan.
Shares of Agriculture-related companies gained on hopes that the government will soon offer subsidies to support ecological development of the sector. Heilongjiang Agriculture Co advanced 1.7% to 13.36 yuan. Zhongken Agricultral Resource Development Co added 1.4% to 8.97 yuan.
In Hong Kong, shares in HK market declined, joining broader losses throughout Asian markets, as investors continued to worry the U.S. Federal Reserve will soon start reducing its monetary stimulus. The benchmark Hang Seng Index was down 181.77 points to 23728.70 while the Hang Seng China Enterprises Index lost 79.57 points to 11368.78.
Among the HK 50 blue chips, 5 stocks rose and 41 fell, with 4 stocks remaining steady. China Merchants (00144) slid 2.3% to HK$27.55, while Citic Pacific (00267) gained 1.3% to HK$12.24, making themselves the biggest blue-chip lose and gainer.
Telecom carriers were mixed amid rumours that China will grant its 4G licences later this week. China Unicom (00762) and China Telecom (00728) softened 0.3% and 1.9% to HK$12.1 and HK$4.07, respectively. . China Mobile (00941) put on 0.9% to HK$84.2. Elsewhere, telecom gear makers were chased. ZTE (00763) jumped 3.4% to HK$17.56. Mobi (00947) and Comba (02342) shot up 6.7% and 4.2% to HK$1.11 and HK$2.76.
In India, Indian benchmark indices edged lower in choppy trade. The barometer index, the S&P BSE Sensex, was provisionally down 127.07 points or 0.61%, up close to 55 points from the day's low and off close to 135 points from the day's high.
Among the 30-share Sensex pack, 18 stocks fell and rest rose. Hindalco Industries (down 2.14%), ONGC (down 1.63%) and ICICI Bank (down 1.51%) edged lower from the Sensex pack. Index heavyweight and cigarette maker ITC shed 1.85% at Rs 313.30. The scrip hit high of Rs 319.65 and low of Rs 312.15.
Unitech plunged 9.25%. The Life Insurance Corporation is reportedly likely to declare real estate firm Unitech a defaulter for non-payment of interest on a Rs 200 crore loan. Unitech had taken the loan in 2007 from LIC Housing Finance in 2007. The loan portfolio was later shifted to parent LIC. The state-owned insurer has also issued a notice to the company barring it from selling the Noida Sector 96 land, which has been pledged as collateral against the loan. The company had issued an advertisement seeking buyers for parts of the property. LIC has made it clear that the land cannot be sold unless Unitech repays the loan.
Shares of state-run Power Grid Corporation (PGCIL) rose 1.9% to Rs 95.60 as the company's follow-on public offer (FPO) was almost fully bid. The FPO of PGCIL was subscribed 99% by 15:00 IST on day two of the FPO today, 4 December 2013. The FPO received bids for 77.99 crore shares till 15:00 IST today, 4 December 2013, compared with 78.70 crore shares on offer, as per NSE data.
Essar Oil rose 1.2% to Rs 54.95 after the company said it has received a notice from promoter company, Essar Energy Holdings seeking conversion of FCCBs aggregating $262 million into equity shares. The announcement was made during trading hours today, 4 December 2013. Essar Oil said it will allot 3.88 crore equity shares at Rs 138 per share on conversion of 1,150 foreign currency convertible bonds (FCCBs) of $100,000 each aggregating to $115 million which were issued on 15 June 2010 to Essar Energy Holdings. The company will also allot 4.5 crore equity shares at Rs 153 per share on conversion of 1,470 FCCBs of $100,000 each aggregating to $147 million which were issued on 9 July 2010 to Essar Energy Holdings.
Elsewhere in the region, New Zealand's NZX50 index fell 1.04%. Indonesia's Jakarta Composite index sank 1.11%. South Korea's KOSPI fell 1.12%. Taiwan's Taiex index rose 0.3%. Singapore's Straits Times index fell 0.85%. Malaysia's KLSE Composite dropped 0.13%.
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