Market participants are awaiting the highly anticipated non-farm payroll report from US after strong US growth data on Thursday fuelled speculation of a sooner than expected reduction in the bond buying program. Investors are worried that stronger-than-expected U.S. jobs data could lead to a December start of scaling back of Federal Reserve's monetary easing scheme.
Two Fed officials called for a time table for tapering the USD 85b per month asset purchases overnight. Dollar Fed Fisher urged to provide a "definite path as to when we reach zero" when deciding to start to scale back the quantitative easing program. Atlanta Fed Lockhart said when FOMC arrives at a decision to wind down asset purchases, "it will be helpful to the transition process to provide as much certainty as possible about how this will be done.
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 Asia bourses, shares in the Australian financial market finished weaker, as losses in realty, financials, industrials and healthcare counters were overshadowing gains in energy, tech and precious metal players. The All Ordinaries Index (XAO) slipped by 0.2% today, taking the losses this week to a significant 2.3%.
Qantas Airways shares extended yesterday's slump, falling by 3.7% to A$1.03 (down 11.2% on Thursday), after the company warned it expects to post an underlying loss before tax of $250 million to $300 million for the six months ending Dec. 31. Australia's largest airline also announced plans to cut costs by A$2 billion over three years. It is currently reviewing its capital expenditure and structure due to market conditions and will provide an update to the market in February 2014.
Qantas has downgraded to junk status just a day from Standard & Poor's with "BB+/B" rating after the airline announced the axing of 1000 jobs and warning it could fall to a A$300 million loss in the first half of this year.
In Japan, Japanese financial market finished higher for the first time in three sessions, after darting out of small gains and losses early today, on the back of late bargain-hunting thanks to the government approval of stimulus package. The benchmark Nikkei Stocks Average added 122.37 points to 15299.86, while the broader Topix index climbed 6.18 points to 1235.83.
The advance in the Japan market came after the Prime Minister Shinzo Abe's cabinet approval 18.6 trillion yen ($182 billion) package on Thursday to pull the economy out of deflation. The package has a headline value of 18.6 trillion yen ($182 billion), which is an exaggerated figure as the bulk of the package includes loans from government-backed lenders and spending by local governments that was already scheduled.
The core of the package is 5.5 trillion yen in spending measures which Abe ordered in a bid to mitigate the expected drag on the economy from an upcoming sales tax increase in April, bundling steps to encourage corporate investment and employment, as well as hand-outs for low-income households. Prime Minister Shinzo Abe had instructed his government to compile the package in October when he decided to raise the 5% sales tax to 8% in April. Fujifilm Holdings rose 4.0% to 2,858 yen after the company announcement yesterday it will partner with a large U.S. Alzheimer's disease research consortium over a clinical trial of the drug "T-817MA."
Advantest rose 6.1% to 1297 yen on reports that it plans to cut costs so that even lower sales figures will allow the firm to post profits.
In China, shares of the China financial market declined for second straight day, as investors continued withdrawing profits after the market rose to a three-month high on Wednesday. Meanwhile, selling was also flared on caution ahead of a number of economic data. The trade data will be released on Sunday while inflation is due on Monday. The Shanghai Composite declined 9.96 points to finish at 2237.11, while the CSI 300 Index fell 15.91 points to 2452.29.
Shares of China coal companies declined, on news that price negotiation between coal firms and power plants will resume next week. Selloff in coal stocks also fuelled after Masterlink Securities Corp. said worsening pollution may spur a shift away from fossil fuels. China Shenhua, the biggest coal producer, dropped 0.9% to 17.05 yuan. Yanzhou Coal Mining Co. fell 1% to 10.10 yuan.
In Hong Kong, HK shares were finishing firmer in volatile trade, with gains in financials helping offset losses in coal miners. The benchmark Hang Seng Index was provisionally up 30.53 points to 23743.10 while the Hang Seng China Enterprises Index lost 19.57 points to 11376.17.
Among the HK 50 blue chips, 17 stocks rose and 30 fell, with three stocks remaining steady. Tencent (00700) was top blue-chip winner, rising 2.3% to HK$460. Coal mining firms were weaker on news that price negotiation between coal firms and power plants will resume next week. China Coal (01898) and China Shenhua (01088) slid 1.7% and 2.3% to HK$5.06 and HK$25.45, making themselves the biggest blue-chip losers.
Standard Chartered PLC shares fell 2.70% to HK$169.30 extending Thursday's drop of 4.7% after the lender said for the first time in a decade that its operating profit will decline.
The Hong Kong Monetary Authority announced today the official foreign currency reserve assets of Hong Kong amounted to US$308.6 billion as at the end of November 2013 (end-October 2013: US$309.6 billion). There were no unsettled foreign exchange contracts both at end-November and end-October 2013. The total foreign currency reserve assets of US$308.6 billion represent over seven times the currency in circulation or about 50% of Hong Kong dollar M3.
In India, Indian benchmark indices finished higher in volatile trade as European stocks rose and as trading in US index futures pointed to a higher open on Wall Street later in the global day. The barometer index, the S&P BSE Sensex, provisionally settled above the psychological 21,000 mark, having alternately moved above and below that mark during the trading session. The Sensex was provisionally up 81.87 points or 0.39%, up about 115 points from the day's low and off close to 10 points from the day's high. From the 30-share Sensex pack, 22 rose and rest fell. Coal India (up 4.36%), ONGC (up 1.65%), and L&T (up 1.14%) edged higher from the Sensex pack.
Metal stocks in BSE extended recent gains triggered by data showing that manufacturing activity in China continued to grow last month. China is the world's largest consumer of copper and aluminum. Jindal Steel & Power (up 0.35%), Sail (up 0.01%), Sesa Sterlite (up 0.86%), Hindustan Copper (up 0.43%), Tata Steel (up 0.36%), Bhushan Steel (up 0.02%), Hindustan Zinc (up 0.28%) and National Aluminum Company (up 1.49%), gained.
Cairn India rose 2.23% as US crude oil futures headed for the biggest weekly gain in five months as the US economy posted the fastest growth since the start of 2012 and crude stockpiles shrank. US crude oil futures for January 2014 delivery were down 14 cents a barrel at $97.24 a barrel in the electronic trading today, 6 December 2013. The contract had gained 18 cents a barrel or 0.18% to settle at $97.38 a barrel on the New York Mercantile Exchange on Thursday, 5 December 2013, its highest closing level since 29 October 2013. Higher crude oil prices will result in higher realizations from crude sales for oil exploration firms like Cairn India.
Power Grid Corporation of India (PGCIL) rose 2.24% to Rs 98.30, on strong response from institutional investors to the company's follow-on public offer (FPO). The FPO was subscribed 5.62 times till 15:00 IST on the last day of the bidding for the FPO today, 6 December 2013. The FPO received bids for a total 441.94 crore shares till 15:00 IST today, 6 December 2013, compared with 78.70 crore shares on offer, as per NSE data.
Elsewhere in the region, New Zealand's NZX50 index fell 0.14%. Indonesia's Jakarta Composite index sank 0.86%. South Korea's KOSPI fell 0.22%. Taiwan's Taiex index shed 0.1%. Singapore's Straits Times index fell 0.33%. Malaysia's KLSE Composite rose 0.11%.
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