US outlook weighs on Asian markets

The yen strengthened by 0.3 per cent to Y109.68 against the dollar as many interpreted the statement as meaning the Fed will continue to cut interest rates.

The MSCI Asia Pacific Index lost 1.3 per cent to 155.92 at 1:03 p.m. in Tokyo, Bloomberg reported.

"We regard the pull back as rather healthy although some of the racier fund managers may not agree," said Hugh Young, head of Aberdeen Asset Management in Singapore.

Japanese shares had a volatile morning session and by early afternoon, the Nikkei 225 average was 1.45 per cent lower at 14,991.45. The broader Topix index lost one per cent to 1,455.32. Exporters once again suffered on the prospect of slowing demand lowering sales in the US and the stronger yen making Japanese products more expensive. Electronics giant Toshiba dropped by 2.6 per cent to Y853 and Toyota Motor (NYSE:TM), the second biggest seller of cars in the US, fell by 2 per cent to Y5,990. Earth-moving equipment maker Komatsu lost 2.5 per cent to Y3,180.

But Inpex Holdings, one of Japan's biggest oil explorers, jumped 3.6 per cent to Y1.15m on dearer oil.

The biggest falls were in Hong Kong. The Hang Seng index ended the morning session 2.7 per cent lower at 14,991.45. Cathay Pacific Airways dipped as much as one per cent to HK$18.22 on speculation that jet fuel prices would continue to rise. China Eastern Airlines (NYSE:CEA) dropped 7.8 per cent to HK$5.58. Air China sank 3.2 per cent to HK$8.25.

Two of China's biggest oil producers rose. CNOOC was up by 0.9 per cent at HK$13.34 and PetroChina (NYSE:PTR) rose 1.1 per cent to HK$15.

HSBC, the company with the biggest weighting on the Hang Seng, dropped by 2.2 per cent to HK$132.2 on worries about the US economy and the passing of the deadline for new shareholders to qualify for dividends.

Australian shares benefited from higher oil prices but gains were offset by falls in the price of copper and other base metals. The S&P/ASX 200 index was 0.6 per cent lower by early in the afternoon session at 6,387.40.

Elsewhere in the region, the Straits Times Index in Singapore dropped by 1.3 per cent to 3,394.51, the Jakarta Composite Index lost 0.6 per cent to 2,610.28 and the Kospi in Seoul dropped by two per cent to 1,834.52 on worries about lower bank earnings.