Asian markets mixed, December rate hike eyed

Nov 28, 2016 (LBO) – Japanese stocks traded weaker on Monday after seven straight sessions of gains, with Asian markets mixed, as the U.S. dollar pulled back from decade highs.

The chances of a U.S. rate hike in December, seen at 93.6 percent for a 50 to 75 basis point increase, and 6.5 percent for a 25 to 50 basis point hike, also impacted markets, analysts said.

Japan’s Nikkei 225 fell 0.82 percent, likely due to the yen strength, which is seen as a negative for Japanese export-oriented stocks, CNBC reported. The Shanghai composite was up 0.38 percent, while the Hang Seng edged higher 0.32 percent.

In South Korea, the Kospi recovered from earlier losses to trade up 0.17 percent. Hundreds of thousands people rallied in Seoul at the weekend for the fifth straight week of protests against President Park Geun-hye, who is embroiled in a scandal over influence-peddling.

Last Friday, China and Hong Kong securities regulators announced that the long-awaited Hong Kong-Shenzhen stock connect would kick-off on December 5. The trading link would allow foreign investors to trade Shenzhen stocks from Hong Kong.

The dollar index, which tracks the greenback against a basket of currencies, was softer at 100.99 as of 10:02 am HK/SIN, compared to a surge to 102.07 last week, a level not seen since April 2003.

“We think that the dampening of the dollar strength is temporary. Overall, the USD momentum remains to the upside amid Trump’s vast infrastructure program and Fed imminent tightening,” Cynthia Jane Kalasopatan from Singapore’s Mizuho Bank said in a note on Monday.

Markets have rallied since Donald Trump’s surprise election victory with “Trumponomics” expected to mean more fiscal spending and higher inflation, while interest rates are also expected to rise.

The Dow Jones industrial average ended up 0.36 percent at 19,152.14 on Friday, the S&P 500 closed up 0.39 percent at 2,213.35 and the Nasdaq composite closed up 0.34 percent at 5,398.92.

Reuters reported that Saudi Arabia said it would not attend talks on Monday with non-OPEC members to discuss production cuts, which prompted a fall in crude futures on Friday of more than 3 percent on Friday in the U.S.

U.S. crude futures were down 0.89 percent at $45.65 a barrel, while Brent futures dropped 0.91 percent at $46.81.

Saudi Arabia’s energy minister Khalid al-Falih said he believed the oil market would balance itself in 2017 even if producers did not intervene, and that keeping output at current levels could therefore be justified. He said that Saudi Arabia was not attending the Monday meeting because OPEC members themselves had not agreed on production levels.