Asian markets mostly fell on Wednesday as uncertainty over the future of central bank monetary policy weighed on buying interest while warnings of an extended oil glut sank energy firms.
The region’s traders were given a rocky lead from Wall Street where all three main indexes ended more than one percent lower as a plunge in crude prices shredded already tender nerves.
Investors are trying to understand a slew of contradictory signals from authorities around the world, with the Federal Reserve and Bank of Japan preparing to hold crucial policy meetings next week.
The gatherings come at a time of increasing anxiety that central bankers are considering winding back on years of cheap cash that have helped fuel a rally in global equities.
While the Fed is considering an interest rate hike, which some say could come as early as this month, the Bank of Japan has been reticent in providing concrete promises of any new stimulus despite weak growth at home.
“Investors are waking up to the fact that valuations are high and these record-low interest rates won’t be with us forever,” Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, told Bloomberg News.
“There’s a lot of event risk coming up with the US election, several central bank meetings and oil prices are still looking shaky. Markets had become dangerously reliant on central bank support and this is a bit of a wake-up call that this won’t always be the case.”
– Energy firms fall –
However, while there are concerns about monetary policy, a report in the respected Nikkei business daily said BoJ policymakers were considering cutting borrowing costs further into negative territory, sending banking shares tumbling in Tokyo. The city’s Nikkei index ended 0.7 percent lower.
The BoJ report, and talk of a US rate hike, sent the dollar rallying against the yen. In afternoon trade the greenback bought 103.28 yen from 102.59 yen in New York. The euro rose to 115.00 yen from 115.07 yen.
Shanghai fell 0.7 percent and Singapore shed 0.5 percent. Wellington, Manila and Jakarta also retreated.
Hong Kong shifted in and out of negative territory through the day and was up 0.1 percent in the afternoon while Sydney added 0.4 percent.
Energy shares were among the big losers as oil prices tumbled Tuesday after the International Energy Agency (IEA) said global demand was slowing, pointing to weak consumption in China and India, while supplies were rising.
The estimate came a day after the OPEC exporters club tipped an output increase next year, reversing its previous estimate for a fall.
The commodity edged back slightly in Asian trade. West Texas Intermediate rose 29 cents to $45.19 and Brent added 19 cents to $47.29. However, on Tuesday WTI plunged $1.39 and Brent shed $1.22.
In Sydney, Woodside Petroleum was down 0.7 percent, while Hong Kong-listed CNOOC shed 1.1 percent and PetroChina lost one percent. Inpex and JX Holdings in Tokyo each fell more than two percent.
Prices are also being pressured by traders’ lack of conviction that any deal will emerge from a closely watched meeting between OPEC and Russia next week aimed at addressing the global glut that has hammered prices for two years.