Japan Stock Futures Drop as Fed Signals Stimulus Cut This Year

Japanese and Australian stock futures fell after Federal Reserve Chairman Ben S. Bernanke said the central bank may reduce the pace of asset purchases later this year as economic risks subside.

American Depositary Receipts of Toyota Motor Corp., the world’s largest carmaker, dropped 0.7 percent. ADRs of BHP Billiton Ltd., the biggest mining firm, slid 0.6 percent. Those of machinery-equipment maker Hitachi Ltd. (6501) gained 0.3 percent as CLSA upgraded the shares to outperform.

Futures on Japan’s Nikkei 225 Stock Average (NKY) expiring in September closed at 13,160 in Chicago, down from 13,260 at the close in Osaka, Japan. They were bid in the pre-market at 13,170 in Osaka at 8:05 a.m. local time. Futures on Australia’s S&P/ASX 200 Index retreated 1.1 percent and New Zealand’s NZX 50 Index fell 0.8 percent as a report showed the nation’s economic growth slowed more than economists forecast last quarter.

“We thought Bernanke would be a little more dovish,” Keith Poore, New Zealand-based head of investment strategy at AMP Capital, which has about $126 billion in assets under management, said in a telephone interview from Wellington. “Markets expected asset purchases to continue unabated through at least the end of this year given the recent employment and inflation data. That doesn’t look to be the case at the moment, so equities are coming off. Ultimately the tapering should be positive for equities because it’s predicated on a stronger economy, which is good for earnings.”

Jobless Rate

Bernanke said the Fed may begin tapering bond purchases this year and end them in 2014 should the U.S. economy continue to improve. The unemployment rate will fall to as low as 6.5 percent by the end of 2014, Fed officials predicted, possibly reaching the central bank’s stated threshold to raise the benchmark lending rate. The pace of its bond purchases, currently at $85 billion a month, will also be influenced by economic data, Bernanke said.

Futures on Hong Kong’s Hang Seng Index gained 0.2 percent and contracts on the Hang Seng China Enterprises Index of mainland Chinese companies trading in Hong Kong added 0.3 percent before the release of HSBC Holdings Plc’s so-called China Flash Purchasing Manufacturing Index that is forecast by economists to contract further in June.

The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. dropped 2.5 percent in New York yesterday.

The MSCI Asia Pacific Index, the benchmark regional equities gauge, yesterday traded at 12.8 times average estimated earnings compared with 14.8 for the Standard & Poor’s 500 Index (SPX) and 13 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Futures on the Standard & Poor’s 500 Index fell 0.1 percent, indicating the gauge may extend yesterday’s 1.4 percent retreat, the biggest decline this month.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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