Markets across Asia fell in early Friday trading, with South Korea and Japan leading the region's declines as the global rise in oil prices and expectations of a U.S. interest rate increase weighed on investor sentiment. The moves mirrored a fourth consecutive losing session on Wall Street the day before.
South Korea's benchmark Kospi index fell sharply, with heavily weighted technology names Samsung Electronics and SK Hynix among the decliners, while the smaller Kosdaq index also lost ground. Japan's Nikkei 225 fell as well. Both markets have been sensitive lately to swings in global energy prices and to shifting expectations about the Federal Reserve's September 15 and 16 meeting, since a U.S. rate increase tends to strengthen the dollar and pressure currencies and equities across the region.
The selloff came against a backdrop of a broader energy story that has touched markets worldwide this week. Oil has climbed from under $72 a barrel in early July to above $107 for Brent crude, a move that raises input costs for manufacturers across Asia's export driven economies and adds to inflation concerns for importing countries.
Separately, Hong Kong marked the passing this week of Tung Chee-hwa, who served as the territory's first chief executive following the 1997 transfer of sovereignty from Britain to China. He was 89. His tenure in the late 1990s and early 2000s coincided with Hong Kong's early years under the one country, two systems framework that has shaped its governance since the handover.
Investors across the region will be watching for any signs of stabilization in oil prices, along with next Wednesday's Federal Reserve decision, for cues on how long the current volatility might last.
Why do Fed rate decisions affect Asian stock markets?
A U.S. rate increase tends to strengthen the dollar and can draw capital away from other markets, which often pressures currencies and equities in export dependent Asian economies.