Stock Declines Deepen in Australia, China -- Update

By Kenan Machado Features Dow Jones Newswires

Stock declines in Australia and China deepened into the afternoon Wednesday as traders await the latest statement from the U.S. Federal Reserve.

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Markets in Japan, South Korea and Hong Kong are closed for holidays.

Bank stocks were the source of pain in Australia for a second session, with the S&P/ASX 200 recently down 1.1%. Its fall Tuesday ended a seven-day winning streak, its longest since July.

An underwhelming fiscal first-half report from Australia and New Zealand Banking to start that sector's earnings season has prompted investor selling of banks, heavily weighted in the index.

ANZ declined 3% Wednesday, after a 2.1% drop Tuesday, as analysts continued to weigh in on the report. National Australia Bank declined 2.7%, and Westpac fell 2%.

Credit Suisse said that while it is inclined to be more negative on ANZ after the earnings release--which reported margin pressures amid heightened competition--there is a risk of being too downbeat, given the potential of capital returns.

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The weakness among the lenders more than offset a partial rebound in some oil-related stocks in Australia as crude prices bounced in Asia on Wednesday. Futures rose nearly 1% after declining overnight.

Chinese equities, after opening little changed. weakened as the morning session progressed. Investors took profits in stocks related to the Xiongan economic zone, a proposed megacity a two-hour drive south of Beijing. Stocks related to construction, mining and steel have surged in anticipation of the huge project.

The Shanghai and Shenzhen composite indexes finished morning trading down 0.3%. Overbought conditions in some sectors "may lead to exit of some funds" and "trigger another round" of decline, said Guo Haomin, an analyst at SWS Research.

More broadly, Michael McCarthy, chief market strategist at CMC Markets, said there are signs of investor fatigue. Some indexes in Asia have been hitting multiyear or all-time highs of late.

One market to watch Wednesday on that front is Taiwan. The Taiex hasn't closed above 10000 since 2000 but has been testing that level since March. Taiwan is home to a number of Apple suppliers, and their stocks have been rising strongly in recent months along with Apple's. Though Apple's quarterly earnings report late Tuesday raised concern about iPhone demand, the Taiex climbed early Wednesday to 9980 after finishing Tuesday at 9952.

As money rushes into the market there, the new Taiwan dollar on Wednesday touched a 32-month high against its U.S. counterpart.

Singapore's Straits Times Index rose 0.6% to hit fresh 21-month highs, aided by optimism about bank earnings there.

The Federal Reserve isn't expected to raise interest rates, but the statement due Wednesday afternoon Washington time "could contain a discussion about the balance-sheet taper," said Greg McKenna, chief market strategist at broker AxiTrader.

The minutes of the March meeting showed some agreement that shrinking of the central bank's $4.5 trillion portfolio of Treasury and mortgage securities could start by year's end.

Yifan Xie and Robb M. Stewart contributed to this article.

Write to Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

May 03, 2017 01:28 ET (05:28 GMT)