Asia Stocks Pare Best Monthly Advance Since 2013 on Fed Concern

Updated on

Asian stocks dropped the most since January after the Bank of Japan refrained from boosting stimulus and as the Federal Reserve downplayed weak U.S. economic growth and kept raising interest rates on the table for later this year.

Honda Motor Co. slumped 6.7 percent in Tokyo, the most in six years, after projecting profit that fell short of estimates. Takeda Pharmaceutical Co. slid 2.1 percent after saying it will take a $2.7 billion charge to resolve lawsuits over its Actos diabetes medicine. Industrial & Commercial Bank of China Ltd. fell 1.9 percent in Hong Kong after the world’s biggest lender posted its weakest first-quarter earnings growth on record.

The MSCI Asia Pacific Index fell 1.6 percent to 153.93 as of 4:09 p.m. in Hong Kong, the biggest drop since Jan. 6. The gauge is heading for a 5.2 percent advance this month, the best such gain since September 2013. The Standard & Poor’s 500 Index slipped 0.4 percent on Wednesday after data showed the U.S. economy grew just 0.2 percent in the first quarter, with Fed Chair Janet Yellen attributing part of the slowdown to “transitory factors.” E-mini futures on the S&P 500 Index fell 0.2 percent.

“The jury is still out on whether the weakness points to a more structural slowdown in the economy,” Mark Lister, head of private wealth research at Craigs Investment Partners Ltd., which manages about $7.2 billion, said by phone from Wellington. “While plenty of people are expecting the rate hike to be pushed back even to 2016, its important to watch the next piece of economic news to gauge whether the weakness we’ve seen was a one off or the beginning of a trend.”

U.S. Outlook

Analysts had been expecting the U.S. economy to expand 1 percent in the first three months of the year. A run of disappointing data has cast doubt on how quickly the Fed can meet its goals for full employment and stable prices. Policy makers have said they expect to raise rates this year for the first time since 2006, and that their decision will be guided by the latest data. Economists at Bank of America Corp. cut their second-quarter growth forecast to 2.5 percent from 3.5 percent.

Japan’s Topix index dropped 2.1 percent, the biggest decline since Jan. 6, as markets resumed trading after a holiday. The central bank kept a plan to expand the monetary base at an 80 trillion yen ($672 billion) annual pace, as forecast by most economists. The BOJ pushed back its forecast for reaching a 2 percent inflation target, ascribing the delay to the tumble in oil prices.

The Hang Seng China Enterprises Index of mainland stocks traded in Hong Kong slid 1.2 percent, declining for a third day. China’s Shanghai Composite Index declined 0.8 percent. The Hang Seng Index dropped 0.9 percent.

South Korea’s Kospi index lost 0.7 percent. Taiwan’s Taiex lost 0.3 percent. Singapore’s Straits Times Index slipped 0.4 percent. Australia’s S&P/ASX 200 Index declined 0.8 percent.

New Zealand’s NZX 50 Index advanced 0.9 percent. The nation’s central bank said it will keep interest rates at a stimulatory level and would cut them if demand and prices weaken.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE