Asia report: Markets mixed on US interest rate concerns

The stock markets that were open in Asia finished in a mixed state on a quiet Wednesday, with bourses in Japan, China and South Korea closed for public holidays.

In Japan, traders were off for the final day of the ‘Golden Week’ holidays, celebrating Children’s Day, as the yen weakened 0.05% against the dollar to last trade at JPY 109.39.

On the mainland, markets in China were closed for the third and final day of the country’s Labour Day holiday.

South Korea’s boards were also turned off, also for Children’s Day, while the Hang Seng Index in Hong Kong slipped 0.49% to 28,417.98.

The moves in Asia came after a downbeat session on Wall Street overnight, where the S&P 500 fell and the Nasdaq Composite recorded its worst day since March, on the back of a sell-off in big technology plays.

That came after US Treasury Secretary Janet Yellen suggested interest rates might need to head north, in a bid to control the explosive, government stimulus-backed growth in the American economy.

“It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat,” Yellen said at an economic forum hosted by the Atlantic magazine.

“Even though the additional spending is relatively small relative to the size of the economy, it could cause some very modest increases in interest rates.”

Yellen did describe the stimulus as investments the economy needed to be competitive and productive.

“I think our economy will grow faster because of them.”

Later in the day, Yellen pedalled back on her comments somewhat, saying at the Wall Street Journal’s CEO Council summit that hiking interest rates was not something she was “predicting or recommending”, adding that she appreciated the independence of the Federal Reserve.

AJ Bell investment director Russ Mould said there were fears that a swift economic recovery in parts of the world could lead to some central banks reducing monetary stimulus earlier than previously expected, which would be negative for stocks and shares.

“Investors must also consider potential tax rises in the future for US companies and when interest rates might rise, particularly as Treasury Secretary Janet Yellen yesterday said rates might have to go up to stop the US economy from overheating,” Mould said.

“Asian stocks were mixed on Wednesday, with Hong Kong’s Hang Seng index falling 0.6% thanks to a sell-off in healthcare and consumer cyclical stocks.

“The opposite was true with India’s BSE Sensex with those sectors helping to drive up the index by 0.8%.”

Oil prices were higher as the region went to bed, with Brent crude last up 1.19% at $69.70 per barrel, and West Texas Intermediate ahead 1.16% to $66.45.

In Australia, the S&P/ASX 200 was up 0.39% at 7,095.80, as the hefty financials subindex advanced 0.57%.

The country’s big four banks closed in a mixed state, with Commonwealth Bank of Australia up 2.51% and National Australia Bank 0.44% firmer, while Australia and New Zealand Banking Group slid 3.23% and Westpac Banking Corporation slipped 0.12%.

Among the other positive sectors in Sydney, the energy and materials subindices were 0.21% and 0.78% higher, respectively.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 lost 0.49% to close at 12,848.31, as medical technology company Fisher & Paykel Healthcare lost 2.8% on the back of Janet Yellen’s comments.

The US healthcare sector is one of Fisher & Paykel’s most important export markets, with the prospect of higher interest rates stateside putting a dampener on its growth prospects there.

Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.2% at AUD 1.2945, and the Kiwi advancing 0.37% to NZD 1.3942.