Asian markets broke their two-day gaining streak and saw a mixed response on 5 November following Janet Yellen's comment on rate increase. The US Federal Reserve's chairwoman said it would be appropriate to raise rates at the Fed's policy meeting scheduled in mid-December in the backdrop of the American economy performing well. This was her first public comment since last week's Fed meeting.
The Shanghai Composite index which was trading higher on 4 November following President Xi Jinping's economy-friendly comments continued to gain on Thursday and closed 1.83% higher at 3522.82. Hong Kong's Hang Seng index was flat at 23,051.04, down just 0.01%. Japan's benchmark index Nikkei 225 too continued its gains and closed 1% higher at 19,116.41. Australia's S&P/ASX 200 closed at 5,193.00 down 0.94%, while South Korea's KOSPI ended 0.16% higher at 2,049.41 and India's BSE was trading 0.91% lower at 26311.30.
An increase in interest rates which is otherwise seen as a sign of a healthy global economy would be bad news for export-oriented Asian economies which are already reeling under shrinking global trade and a China slowdown. Jeremy Lawson, chief economist at Standard Life Investments said: "Emerging markets are facing some stiff headwinds particularly in the form of a historic China transition away from manufacturing-led growth and an entrenched slowdown in global trade."
US data released on Wednesday, indicating increased hiring by private employers and a jump in new orders in the services sector, supported Yellen's optimism. New York Fed President William Dudley agreed with Yellen's comment saying the optimism was in direct contrast with disappointing earnings results of struggling Asian businesses. Tomoaki Shishido, fixed-income strategist at Nomura Securities, said: "Her comment confirmed that a rate hike in December is the Fed's base case scenario."
In commodities, oil has been negatively impacted in recent times by declining demand in China and Russia's record production leading to overall decline in oil prices. WTI Crude oil declined 03.41% to $46.32 a barrel and Brent was down 4.03% at $48.58 a barrel.