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The eagerly awaited announcement from the U.S. Federal Reserve on interest rate hikes resulted in the expected 0.25% rise to be implemented now and the projection of two to three additional quarter point increases over the course of 2017. The immediate reaction on financial markets has been a strengthening of the dollar and a drop in commodity and oil prices, hitting developing market equities and Australia’s commodities heavy stock market. Japan’s Nikkei 225, with its heavy weighting towards exporters who will benefit from a weaker yen to U.S. dollar exchange rate is the one Asian index to have benefitted, recording a modest 0.1% gain on Thursday.
As well as the U.S. dollar moving sharply up into the 117-yen range from around 114 yen, other economic news supporting Japanese equities came in the form of data showing a continued and faster rate of expansion in the manufacturing sector in December. December is showing a PMI score of 51.9 compared to 51.3 for November.
Exporters led the Nikkei 225 higher on Thursday, with energy and commodities focused stocks providing the drag. The day’s biggest gainer on Thursday was Taiyo Yuden, an electronics company that was among the pioneers of recordable CD technology, up 6.1%. Mitsubishi Motors was the next strongest riser, up 5.48%, followed by bearings manufacturer NSK with a return of 3.02%. Another bearings manufacturer, NTN Corp. was also among the day’s leaders, up 2.85%.
While the fallers leader board has a heavy presence of commodities and energy-focused companies, the biggest faller was ship, aircraft engine and turbocharger manufacturer IHI, which slipped to a 3.77% loss with residential property construction company Haseko Corp. next, down 3.44%. Petroleum and metals conglomerate JX Holdings was third with a loss of 2.83%. Oil company Inpex (-2.71%), Toho Zinc (2.41%), Mitsui Mining and Smelting (-2.23%), Tokyo Electric Power (-2.23%), Showa Shell Sekiyu (-2.17%) and Furukawa Electric (-2.01%) were all among the day’s steepest fallers.
In Australia, the ASX 200 finished Thursday down by 0.82%, dragged down by commodities stocks which form the backbone of the country’s economy. Data on the unemployment rate and new jobs created was mixed. While the economy added 39,100 new jobs in November, easily beating forecast of 17,500, the unemployment rate missed forecasts, growing to 5.7% from 5.6% in October when it had been expected to remain flat. The A$ dropped against the U.S. dollar following the Fed statement.
As would be expected, miners took a hit today with BHP Billiton down 1.8% and Rio Tinto 1.4%. South32 also lost 3.5%. Yesterday’s big loser, oil and gas company Santos, lost another 10.7%, however the company’s falling share price is being hit more by its recent announcement it will raise capital, rather than a result of the Fed statement on interest rate hikes.
In the banking sector Commonwealth Bank of Australia shed 0.7% and Wespac 0.3%. New Zealand pay-tv company Sky Network Television continued the slump initiated by a downward revision of its EBITDA forecast and lost a further 4.2%. Finally, casino operator Crown Resorts has had trading of its shares temporarily suspended after it announced it would look to sell Melco International, an Asian casino developer, owner and operator.
