Asian Stocks Drop After Fed Minutes as Dollar Holds Gains

10-Jan-2014 Intellasia | Bloomberg | 6:00 AM Print This Post

Asian stocks fell as Japanese shares slid from a 5 1/2-year high, and regional bond risk rose as an inflation report in China pointed to weaker growth. The dollar climbed before US jobs data and natural gas extended losses on forecasts for warmer weather.

The MSCI Asia Pacific Index declined 0.5 percent by 11:35 a.m. in Tokyo as Japan’s Topix decreased 0.6 percent. The Bloomberg US Dollar Index climbed 0.1 percent to the highest since September and Standard & Poor’s 500 Index futures were little changed. Credit risk in Asia rose for a ninth day. The yuan was fixed near a two-week low against the greenback and South Korea’s won pared losses after the central bank kept rates steady. Natural gas sank 1.1 percent, sliding for a third day.

Data today showed China’s inflation eased and producer prices extended declines. A US report may show initial claims for unemployment benefits fell, supporting the Federal Reserve’s decision to reduce bond purchases, as Alcoa Inc. starts the fourth-quarter earnings season after markets close. Policy decisions are expected from the European Central Bank and the Bank of England.

“Sentiment is extremely negative toward emerging markets right now,” Jonathan Garner, the head of Asia and emerging-markets strategy at Morgan Stanley, said in a Bloomberg Television interview. “At some point we’ll define an entry opportunity but in our view, it’s not yet. There’s been a notable improvement in business confidence in Japan and that’s all been helped by currency weakeness and what the Bank of Japan has been doing.”

Fast Retailing

Japan’s Topix retreated from its highest close since July 2008 before Fast Retailing Co. reports results after the market shuts. Asia’s biggest apparel chain sank 2.9 percent, dragging the Nikkei 225 (NKY) Stock Average down 1.3 percent.

Fed officials judged the efficacy of their record bond-buying programme was diminishing, according to minutes of the December 17-18 Federal Open Market Committee meeting, when policy makers decided to cut asset purchases by $10 billion to $75 billion from January.

As the Fed begins to slow the pace of economic stimulus measures that fueled gains in emerging-market assets, the Bank of Japan is persevering with its plan to buy more than 7 trillion yen ($67 billion) of government bonds a month to boost inflation, weakening the yen.

China’s Shanghai Composite Index fluctuated between a gain of 0.5 percent and a loss of 0.3 percent as China’s producer prices, a measure of the cost of goods as they leave the factory, extended the longest slide since the 1990s in December.

Slowdown Evidence

The producer-price index fell 1.4 percent from a year before, the 22nd straight drop, and consumer prices rose 2.5 percent – less than the 2.7 percent median forecast in a Bloomberg News survey, a government report showed in Beijing. Today’s releases followed declines in gauges of manufacturing and services based on surveys of purchasing managers.

“We may see less growth in China amid reforms but it could be higher quality growth and that could lead to a re-rating of Chinese equities over time,” said Gary Dugan, who helps oversee about $53.4 billion as the Singapore-based chief investment officer for Asia and the Middle East at Coutts & Co., the wealth management unit of the Royal Bank of Scotland Group Plc. More broadly, “there’s a little bit of indigestion in the markets following the very strong finish we’ve had last year. The corporate results season will be the next catalyst to drive the markets forward.”


Category: FinanceAsia

Print This Post

Comments are closed.