[HONG KONG] Asia stocks were mostly down Thursday, with energy and commodity firms taking a beating as investors digested news that an imminent Federal Reserve interest rate hike could be on the cards.
The declines followed a weak lead from Wall Street after minutes from the Federal Reserve's April policy meeting suggested an interest rate hike in June was much more likely than the market believed.
Expectations of a June rate increase based on CME rate derivatives jumped from less than five per cent last week to about 34 per cent.
Hong Kong fell 0.5 per cent in afternoon trade, while Sydney closed 0.6 per cent lower and Seoul dropped 0.5 per cent. Shanghai stocks closed flat.
"There is this enormous policy uncertainty," Randal Jenneke, Sydney-based fund manager at T Rowe Price Group Inc. told Bloomberg News.
"The Fed has changed the goal posts so many times, everyone is confused. No one knows when they're going to raise rates and no one knows what's going to be the key thing to trigger the decision."
Tokyo shares closed flat, with the benchmark Nikkei 225 index ticking up 0.01 per cent.
Shares had opened firmly higher, with exporters lifted after the US dollar surged against the yen, rising above the 110-level for the first time since the Bank of Japan surprised markets on April 28 by holding off fresh stimulus.
A weaker yen is good for Japan's exporting giants, such as Toyota and Sony, as it boosts their profitability and tends to stoke buying of their shares.
But the US unit gave up some of its gains Thursday afternoon, fetching 110.08 yen against 110.20 yen Wednesday in New York.
News that a US interest rate hike was increasingly likely put particular pressure on energy and commodity shares, as oil prices slumped in response to the greenback's surge.
A stronger US dollar puts downward pressure on oil, which is traded in the US currency.
US benchmark West Texas Intermediate was down 1.95 per cent to US$47.25 and Brent crude dropped 2.25 per cent to US$47.82.
Prices had hit fresh 2016 highs on Wednesday due in part to production outages resulting from wildfires around the Canadian oil sands hub of Fort McMurray.
Sydney-listed mining giant BHP Billiton slumped 3.7 per cent Thursday, Rio Tinto dived 3.3 per cent and Woodside Petroleum slid 1.2 per cent.
In Hong Kong, China's CNOOC and PetroChina both lost 2.3 per cent.
Tokyo-listed Inpex sank 5.9 per cent.
Taipei also tumbled, with materials firms among the worst hit. Formosa Chemicals & Fibre plunged 5 per cent and China Steel dived 1.9 per cent.
Some banking-linked equities rose, chasing sharp gains among financial firms in US and European markets.
In forex markets, the US dollar was broadly up against emerging market currencies as investors sought safety.
The Philippine peso was down against the US unit, though the Manila said Thursday the economy grew a better-than-expected 6.9 per cent in the first quarter, putting it on track to meet full year targets and making it one of Asia's best performers for the three-month period.
In early European trade London slipped 0.7 per cent, Frankfurt shed 1.0 per cent and Paris lost 0.6 per cent.