Asian markets retreat on prospects of US rate hike

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Hong Kong (AFP)

Asian markets retreated on Wednesday as investors contemplated the effects of an expected US interest rate hike this year, while the pound staged a mild recovery after suffering a series of losses on worries about Britain's EU exit.

Samsung Electronics suffered another bout of selling, extending its losses this week alone to about 11 percent after it announced late Tuesday it would scrap the troubled flagship Galaxy Note 7 over an exploding battery crisis.

The regional retreat follows sharp falls on Wall Street, where investors were spooked by below-forecast earnings from aluminium-maker Alcoa that raised concerns about the state of corporate America going into the reporting season.

Markets are keenly awaiting the release of minutes from the Federal Reserve September policy meeting, hoping it will give an idea about the bank's plans for lifting borrowing costs.

A string of recent upbeat data on the world's top economy, and increasingly positive comments from Fed boss Janet Yellen, has fuelled speculation rates will rise by the end of the year.

"Stock markets are becoming nervous about the prospect of rising interest rates against a background of moderate profit growth and relatively high valuations," Ric Spooner, chief market analyst in Sydney at CMC Markets, said in an e-mail.

"Given how critical the interest rate outlook is at the moment, markets will be focused on the degree of support for a rate hike this year revealed in the Fed minutes," he said, according to Bloomberg News.

- Pound bounces -

By the break in Tokyo, the Nikkei index was down 0.6 percent, while Hong Kong -- where monetary policy is tied to the United States' -- the Hang Seng Index was 0.9 percent lower.

Shanghai slipped 0.3 percent, Sydney was off 0.4 percent and Singapore shed 0.6 percent, while Seoul dipped 0.1 percent.

The prospects of a US rate hike has rallied the dollar in recent weeks. The pound has taken a particular hiding as Britain's leaders bicker over how to leave the European Union, with many fearing a "hard Brexit" of no access to the EU single market after leaving the bloc.

Sterling has lost nearly 18 percent to sit at 31-year lows against the greenback since British voters narrowly approved Brexit in a referendum in June.

However, on Wednesday it had some respite and edged up against its peers buying $1.2280 from $1.2257 in New York.

In Seoul, the KOSPI was dragged by market heavyweight Samsung Electronics' two percent retreat.

The South Korean giant plummeted 1.5 percent Monday and more than eight percent Tuesday after it stopped production of the Note 7, warning people who bought it already to stop using it.

After the close of trade it then announced it was scrapping the model completely.

The announcements came a little over a month after Samsung announced a recall of 2.5 million Note 7s following complaints that its lithium-ion battery could catch fire.

- Key figures around 0230 GMT -

Tokyo - Nikkei 225: DOWN 0.6 percent at 16,926.32 (break)

Hong Kong - Hang Seng: DOWN 0.9 percent at 23,335.22

Shanghai - Composite: DOWN 0.3 percent at 3,056.59

Pound/dollar: DOWN at $1.2280 from $1.2257

Euro/pound: DOWN at 90.10 pence from 91.15 pence

Euro/dollar: DOWN at $1.1053 from $1.1056

Dollar/yen: UP at 103.50 yen from 103.48 yen

Oil - West Texas Intermediate: UP eight cents at $50.87 per barrel

Oil - Brent North Sea: UP 14 cents at $52.55

New York - DOW: DOWN 1.1 percent at 18,128.66 (close)

London - FTSE 100: DOWN 0.4 percent at 7,070.88 (close)