Asian markets closed the week on a downward note in the backdrop of rising odds of a December rate increase by the US Federal Reserve. Investors' caution over this has overshadowed stimulus promises by global central banks last month which had helped the markets stage a rally in October.
Australia's S&P/ASX 200 was down 1.45% at 5,051.30. Japan's Nikkei 225 was 0.51% lower at 19,596.91. The Shanghai Composite Index dipped 1.43% at 3,580.84. South Korea's KOSPI closed 1.01% at 1,973.29, and Hong Kong's Hang Seng shed 2.15% at 22,396.14. India's BSE closed down 0.99% at 25,610.53.
A recent poll of business and academic economists by the Wall Street Journal indicated that about 92% expected the US Federal Reserve to raise its benchmark federal-funds rate at its policy meeting scheduled on 15 and 16 December. A rate increase would lead to higher borrowing costs for companies affecting their margins at a time of economic slowdown. Expectations of higher rates have strengthened the dollar, which will negatively impact Asian companies if they have dollar-denominated debt.
The decline in US unemployment to 5% sparked speculation that the Fed could effect a rate increase. However, recent comments from Fed officials, including Chairwoman Janet Yellen and regional Fed presidents William Dudley, Charles Evans and Jeffrey Lacker, have not provided much clarity on the central bank's stance. "People are on edge," Andrew Sullivan, managing director at Haitong Securities said, adding that investors "aren't going to change their positions" substantially before December.
In commodities, oil prices declined. While WTI crude oil declined 2.83% to $41.75 a barrel, Brent was down 3.97% at $44.06 a barrel.