Most Asian Stocks Fall Before Yellen as Commodity Shares Slide

Updated on
  • Markets are calm as volatility drops to lowest since 2012
  • China retreats on concern authorities may curb speculation

Most Asian stocks fell as commodity shares slumped, while utility companies gained, before a speech Friday from Federal Reserve Chair Janet Yellen that may provide further clues to the path of U.S. interest rates.

The MSCI Asia Pacific Index pared earlier losses and rose 0.1 percent to 139.10 as of 5:09 p.m. in Tokyo, with 477 stocks sliding and 455 advancing. The Topix index closed 0.2 percent lower as the yen traded at 100.35 per dollar. Energy and material companies tracked Wednesday’s decline in oil after a government report showed U.S. crude inventories unexpectedly rose last week, while power producers and technology shares led gains among the regional gauge’s 10 industry groups. Chinese shares retreated on concerns the government will act to curb speculative activity.

“Everybody is waiting for Yellen, and I’m not sure whether Yellen will provide the impetus all traders are looking for,” said Nicholas Teo, a strategist at KGI Fraser Securities in Singapore. “The Fed rhetoric so far has been balanced although the last two weeks we’ve seen quite hawkish comments.”

Asian stocks have fallen from their highest level in a year as traders speculate on whether Yellen will endorse recent comments from central bank officials that indicated a rise in rates could come as early as next month. Odds that the Fed will raise borrowing costs in December have climbed to 54 percent from 45 percent a month ago, while traders are betting there’s a 28 percent chance of tightening next month, data compiled by Bloomberg show. Asian stock volatility dropped to the lowest since 2012 before Yellen’s speech.

Trading volume in Tokyo has shrunk this week as Japanese shares swung between gains and losses Thursday. The Topix has retreated 16 percent this year, the second-worst performer among developed markets. Still, a 20 percent gain in the yen against the dollar means the equity measure is up 1.3 percent in U.S. currency terms.

With further yen strength likely, the Japanese central bank’s next move could be to introduce helicopter money, said Mark Mobius, executive chairman of Templeton Emerging Markets Group. That would hand consumers or businesses cash directly in a bid to spur spending in the world’s third-largest economy.

“Global markets have rallied over the past seven weeks, but those gains have looked increasingly exhausted over the past three,” James Woods, a strategist at Rivkin Securities in Sydney, said by phone. “We are certainly due for a pullback. That being said, I don’t expect declines to be too large.”

China Slides

The Shanghai Composite Index fell to its lowest in almost two weeks, led by property shares, on concern the government will act to cool speculative activity in the nation’s financial markets. Shanghai authorities are planning to hold meetings to discuss ways to cool surging property prices, according to people familiar with the matter. China Mengniu Dairy Co. surged by the most in seven years in Hong Kong after first-half sales beat estimates. The Hang Seng Index was little changed at the close.

Taiwan’s Taiex Index rose 1.1 percent as data showed foreign investors bought a net $251 million worth of stocks. Australia’s S&P/ASX 200 Index retreated 0.4 percent. New Zealand’s S&P/NZX 50 Index added 0.2 percent.

Futures on the S&P 500 Index declined 0.2 percent. The U.S. equity benchmark index slipped to a three-week low on Wednesday, dragged lower by a selloff in health-care and biotechnology companies. Hawkish remarks from Fed officials and lackluster data has stymied advances that has led to a series of all-time highs for U.S. stocks as investors turn their attention over the prospects of higher borrowing costs.

West Texas Intermediate crude dropped 2.8 percent on Wednesday after a government report showed that U.S. crude inventories unexpectedly rose last week.

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