Asian shares took a mixed lead form offshore after stock markets in the United States closed marginally higher on Wednesday while shares in the United Kingdom and Europe were mostly lower. Risk sentiments hit further by escalating tensions in Ukraine.
Russian President Vladimir Putin ordered drills by his armed forces to test combat readiness in western Russia, near the border with Ukraine, prompting Washington to warn a military intervention would be a "grave mistake.
Most of the regional markets made small gains after another lackluster session. Traders were hesitant to make bold move before the U.S. Federal Reserve chief Janet Yellen's testimony to a Senate panel later in the global day. While many traders believe the Fed will maintain a measured reduction of its monthly bond purchases that started in January, some are look to see if mixed U.S. economic data in recent weeks may prompt Ms. Yellen to adjust her view of the economy.
Yellen is unlikely to say anything specifically critical about the rash of soft data, but if she touches on the weather situation and seems optimistic about the outlook from March onward, it will indicate that stimulus tapering will continue as planned and should push up the dollar. It would be a great surprise if Yellen speaks with nuance about slowing the pace of tapering, but if she does so it will stoke fears that something is fundamentally wrong with the U.S. economy beyond a dusting of snow.
Although concern about the effect of the tapering on emerging economies has recently ebbed, Yellen's comments are valuable to market participants for clarification. She may also clarify the weight the Fed puts on the unemployment rate as a means of judging U.S. economic health, and could use the testimony as an opportunity to hint at how the next Federal Open Market Committee will cover unemployment.
Among Asian markets, key benchmark indices of the Japan's stock market finished weaker, as profit taking in blue chips stocks amid lack of incentives from offshore market and on caution ahead of Fed testimony. The benchmark Nikkei-225 index dropped 0.32% to finish the session at 14923.11, while the broader Topix index of all first-section shares declined 0.65% to 1217.35.
Japanese investors were watching for Friday's release of economic data for January, looking for signs of how a sales tax hike due to take effect April 1 might affect the country's recovery.
Shares of realty and lenders saw heightened selling following strong recent run, with Sumitomo Realty & Development losing 3.0% and Daiwa House off 2.7%. Among banks, Mitsubishi UFJ Financial Group dropped 1.7%. Both banks and real estate benefited the most from the inflationary effects of yen's weakening and a looser money supply, as they hold large amounts of land and securities assets.
Tokyo Electron added 2% after a Nikkei report that it is expected to report positive free cash flow for the current fiscal year, reversing the flow of red ink.
In Australia, shares in the Australian stock market declined, as investors were booking profit after a recent bull run. The benchmark S&P/ASX 200 Index closed 25.60 points, or 0.47%, down at 5411.40, while the broader All Ordinaries Index sank 26 points, or 0.48%, to 5421. All secoral indices dived into red, with bullion, industrials, energy and materials blue chips leading downfall. Meanwhile, selling pressure also evident in utilities, healthcare, realty, consumer discretionary, and financials counters.
Australian shares took a mixed lead form offshore after stock markets in the United States closed marginally higher while shares in the United Kingdom and Europe were mostly lower. The local stock market moved lower after Australian Bureau of Statistics data showed business spending fell 5.2% in the December quarter. It was a bigger decline than the market expected. More worryingly, the downturn in capital expenditure looks set to worsen with a measure of business spending intentions 17.7% lower than the same period a year earlier.
Shares of industrials sector was the worst performer in the Sydney market, down 1.4%, after Australia's largest airline Qantas (QAN) posted a A$252 million first half loss. The loss was not as bad as expected, yet the airline announced job cuts of 5000, at the upper end of market expectations. No guidance was given nor did QAN announce an interim dividend. The airline has not paid a dividend since March 2009. QAN shares fell 9.1% to A$1.155. among other industrial heavyweights, Leighton's shares declined 1.9% to A$17.74 and Bramble declined 0.4% to A$9.44.
Transfield Services (TSE) shares declined 11.9% to A$0.85 despite engineering and maintenance contractor posted a small A$4.6 million 1H profit, swinging back to the black after a A$246.7 million loss this time last year. TSE forecast FY profit between A$65-70 million as it sees growth in its oil and gas revenue. The company won't pay an interim dividend.
The world's largest job outsourcing company Freelancer (FLN) posted a A$753,000 FY net profit, 57% higher than its own forecasts but only a 3.4% increase on the last year's profit. FLN shares fell 5.4% today to A$1.40 although they have tripled since listing.
Seven Group Holdings shares fell 2% to A$8.01 after media and investment conglomerate underlying interim net profit sank 44%, and the company confirmed its guidance for a 30% to 40% fall in annual earnings. Rival media company Nine Entertainment Co rose 0.4% to A$2.29 as the company results came in slightly ahead of expectations outlined in the prospectus for its December float. Nine Entertainment Co posted a 1H net profit of $31.7 million compared to a $94 million loss this time last year. Revenue increased 22% to $802 million.
In China, Mainland China stock market extended gains for second day in row, helped by bargain buying in in recently battered stocks. The benchmark Shanghai Composite Index closed 0.3% higher at 2047.35, on the top of 0.35% gain prior day.
The bargain buying in the Shanghai market largely underpinned on calming concerns about Chinese currency yuan depreciation after the country's foreign-exchange regulator said a recent slide in the yuan is a result of market forces. The State Administration of Foreign Exchange said in a statement that recent weakness is the result of investors' adjusting trading strategies. Two-way movement of the yuan rate will become normal as the government pushes forward with foreign-exchange reforms, SAFE said.
Meanwhile, rebound in the after share prices also supported by PBOC comments delivered via state media late Wednesday suggested that the bank has, if anything, become more dovish on monetary conditions. "Our current money market rates have been falling and liquidity levels in the banking system are generally appropriate," said an unidentified PBOC official with responsibility for managing liquidity.
China Petroleum and Chemical Corp (Sinopec) soared 6.7 percent to a 10-month high in Shanghai, after Beijing increased fuel prices and hopes remained that a coming annual parliamentary session will push ahead reforms in state-run enterprises. The National Development and Reform Commission raised the retail price of gasoline and diesel by about 2 percent, effective Thursday, as part of its fuel price review every 10 working days.
The People's Bank of China scooped another 160 billion yuan out of the banking system this week as money market rates continued to trade at relatively low levels, implying that banks have adequate funding on hand. The 60 billion yuan drain via 14-day repos during Thursday's open market operation followed Tuesday's 100 billion yuan using the same instruments. Thursday's operation is the fourth in a row that the PBOC has removed money from the system. The bank drained a net 108 billion yuan from the system last week.
In Hong Kong, shares in the city's market extended gains for second day, with the benchmark Hang Seng index ending the session 1.74% higher at 22828.18, following a positive lead from Wall Street overnight and as investor cheers 2014-15 Budget. All sectors in the HK market finished higher, led by financials, resources, realty and industrial clue chips.
The market sentiments in the HK buoyed by comments from Hong Kong's Financial Secretary John Tsang that the southern Chinese city's economy is expected to grow by as much as 4% this year compared to 2.9 per cent in 2013.and 1.5 percent in 2012.
Hong Kong unveiled a modest package of measures for its working class in its budget on Wednesday, as it tries to ease pressure on its finances while appeasing voters increasingly concerned about the city's growing income gap. In a speech focused on maintaining Hong Kong's competitiveness, Financial Secretary John Tsang said its economy grew 2.9 percent last year compared with 1.5 percent in 2012, and was expected to expand 3 to 4 percent this year. The budget contained some tax cuts for the working class but a bumper "give-away" package didn't materialise this time. Tsang did budget around HK$20 billion in one-off relief measures including tax concessions, rent subsidies for public housing tenants and welfare handouts. But that was below the previous year's HK$33 billion in one-off assistance. The city's lower- and middle-income families struggle with rising costs from home prices that have more than doubled since 2008, and the spillover effects of a strengthening yuan. The government recorded a provisional surplus of HK$12 billion ($1.6 billion) for the 2013/14 fiscal year, in line with expectations, but far less than HK$64.8 billion last year.
Standard & Poor's Ratings Services said today that Hong Kong's strong fiscal performance and forward-looking policy orientation underpin the issuer credit rating (AAA/Stable/A-1+; cnAAA/cnA-1+). S&P said the budget speech also reflects the strong and forward-looking policy environment that also underpins the 'AAA' rating on Hong Kong.
Among the HK 50 blue chips, 49 rose and 1 fell. China Petroleum & Chemical Corp rose 5.3% to HK$6.99after Beijing increased fuel prices and hopes remained that a coming annual parliamentary session will push ahead reforms in state-run enterprises, while China Overseas Land & Investment fell 1.4% to HK$20.60, making them top performing gain and loser.
Elsewhere in the Asia Pacific region, South Korea's KOSPI index added 0.39%. Taiwan's Taiex index grew 0.45%. Malaysia's KLSE Composite rose 0.5%. Singapore's Straits Times index jumped 0.27%. New Zealand's NZX50 dived 0.18%. Indian market closed for holiday.
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