* Asia markets ease but poised to end the week higher
* N. Korea conducted fifth and most powerful nuclear test
* European stocks set to follow Asia lower
* Bond yields up on ECB, rise in oil prices
* Oil prices pull back from 2-week high
By Nichola Saminather and Hideyuki Sano
SINGAPORE/TOKYO, Sept 9 Asian shares extended
losses after North Korea conducted its fifth and most powerful
nuclear test on Friday, heightening geopolitical tensions in the
region at a time when investors are grappling with slowing
Stocks were already on the back foot when the North Korean
news rattled markets, with uncertainty over the prospect of
further easing from the European Central Bank pressuring global
equities and bonds.
European shares look set to follow Asia lower, with
financial spreadbetters expecting Britain's FTSE 100,
Germany's DAX and France's CAC 40 to all open
down 0.1 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan
dropped 0.5 percent after touching a 13-month
high on Thursday. The decline shrank gains for the week to 2.5
Japan's Nikkei closed flat after pulling back
earlier on reports of the North Korean nuclear test. It up 0.2
percent for the week.
North Korea's nuclear test set off a blast that was more
powerful than the bomb dropped on Hiroshima, with the nation
saying it had mastered the ability to mount a warhead on a
South Korea's KOSPI also extended losses on its
neighbour's nuclear activity. After opening 0.7 percent lower,
it was last trading down 1.3 percent from Thursday's close.
China's CSI 300 index was 0.25 percent lower, and
the Shanghai Composite was down 0.2 percent. They are set for
gains of 0.7 percent and 1 percent, respectively, for the week.
China's consumer price inflation slowed to its weakest pace
in almost a year in August, missing expectations.
Still, moderating declines in the producer price index added
to recent evidence of a steadying economy.
That evidence included data on Thursday showing China's
imports rose unexpectedly in August for the first time in nearly
two years, suggesting domestic demand may be picking up. Exports
also showed signs of improvement, falling less than expected.
Hong Kong was the sole gainer among major Asia
ex-Japan markets, with shares up 1.4 percent, extending their
weekly advance to 4.2 percent, the most in almost two months.
The market has been buoyed by inflows from China as investors
bet on gains ahead of the launch of a new cross-border share
On Thursday, ECB President Mario Draghi, speaking after the
central bank kept its policy on hold as expected, said the ECB
was looking at options to continue its money-printing programme,
but maintained the March end-date for asset purchases.
That disappointed investors who were looking for more
immediate action, including an extension or expansion of the
current plan, or at least clearer hints of future actions.
"President Draghi's comment that an extension of the current
quantitative easing programme was not discussed led to a hawkish
market interpretation of the meeting," Shane Oliver, head of
investment strategy at AMP Capital in Sydney, wrote in a note.
However, inflation levels that remain below target and
various other dovish comments from Draghi "indicate that an
extension of the quantitative easing programme beyond its March
2017 expiry at its December meeting is likely," Oliver added.
Overnight on Wall Street, the S&P 500 lost 0.22
percent, weighed down by a 2.6 percent fall in Apple on
disappointment over its latest iPhone, though gains in energy
shares offset losses in most other sectors.
German shares bore the brunt of the ECB's let-down, and
France also retreated, but shares in Britain and Southern Europe
Global bond markets also took a hit with the 10-year German
Bund yield rising to minus 0.055 percent from minus
0.118 percent on Wednesday.
U.S. bond yields also jumped, with the 30-year bond yield
rising to one-month highs of 2.328 percent on
Thursday. They pulled back slightly to trade at 2.3102 on
The euro climbed to $1.1328, its highest since Aug.
26, following the ECB meeting before giving up most of its gains
to stabilise around $1.1282. It is set for a 1.1 percent rise
The dollar retreated 0.3 percent to 102.145 yen,
surrendering some of Thursday's gains resulting from the wider
gap between U.S. and Japanese bond yields. It is poised to end
the week 1.8 percent weaker.
With the ECB meeting out of the way, the focus now shifts
back to the Fed's policy meeting later this month.
"A rate hike in September is highly unlikely," said Hiroko
Iwaki, senior bond strategist at Mizuho Securities.
"But unless the Fed sends a message, it will be difficult
for them to make the markets price in a rate hike by the end of
the year. So they could say something like they will consider a
hike in coming months," she said.
Oil prices pulled back after surging more than 4 percent on
Thursday to two-week highs on a slump in U.S. Gulf Coast imports
to a record low led to a surprisingly large drawdown in U.S.
Brent rose to as high as $50.14 per barrel on
Thursday. It pulled back 0.9 percent to $49.54, still up 5.8
percent this week.
U.S. crude climbed as high as $47.75 on Thursday. It
retreated 0.8 percent to $47.22, but remained on track for a 6.3
percent advance for the week.
The weakness in the U.S. dollar this week has offered gold a
boost. Spot gold has risen 1 percent to $1,337.95 this week, the
biggest weekly gain in six weeks.
(Reporting by Nichola Saminather and Hideyuki Sano; Editing by
Jacqueline Wong & Shri Navaratnam)