Asia Stocks Rise as Japan’s Topix Rallies Amid Stronger Dollar

  • Topix index rises in August for the first time since 2009
  • Traders price in a higher possibility of a U.S. rate hike

Asian stocks rose, with Japanese shares advancing in August for the first time in seven years, as banks rallied and the yen weakened amid expectations for an increase in U.S. interest rates this year.

The MSCI Asia Pacific Index climbed 0.1 percent to 138.11 as of 5:01 p.m. in Tokyo. The index has climbed 1.2 percent this month after jumping 5.8 percent in July. Japan’s Topix index added 1.3 percent, erasing its loss for August, as the yen traded at 103.28 to the dollar. The currency fell for five straight days through Tuesday, its longest such streak since March, on mounting speculation the Federal Reserve will raise interest rates.

“It looks like market participants see a higher possibility of a U.S. rate hike,” said Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo. “With the yen close to 103 to the dollar it’s positive for Japanese shares. That said, no one’s entirely forgotten about the U.S. jobs data coming up so we may also see some fluctuation.”

Japanese shares have led gains among Asian developed markets in August as growing expectations for a rise in U.S. rates this year boosts the dollar at the expense of the yen. Investors are watching data closely for clues on whether the global economy can take on higher borrowing costs. Traders saw a 59 percent chance of a rise in borrowing costs in the U.S. as of Tuesday, up from 53.9 percent a week earlier.

Vice Chairman Stanley Fischer said Tuesday that any rate increase will be data dependent, having previously pointed to employment figures on Friday as being of key importance. More light may be shed on the timing of borrowing cost hikes when regional Fed chiefs for Chicago, Boston and Minneapolis speak on Wednesday. U.S. Treasury Secretary Jacob Lew is scheduled to comment on what to expect at the Sept. 4-5 Group of 20 leaders’ summit in Hangzhou, China.

“Fischer’s comments aren’t different from what he has said previously, but the reiteration of his stance may encourage some to further weigh odds of a September hike,” said Chihiro Ohta, a Tokyo-based senior strategist with SMBC Nikko Securities Inc.

U.S. Payrolls

U.S. consumer confidence increased to an almost one-year high in August as Americans became more optimistic about the labor market, according to a report from the New York-based Conference Board on Tuesday. Investors will also be looking to Friday’s payrolls data for more clarity on the timing of a tightening.

In Japan, industrial production for July was unchanged from last year, missing economist estimates of a 0.8 percent growth. The yen’s strength and a limited recovery in external demand may have weighed on output via exports, according to Bloomberg Intelligence.

South Korea’s Kospi index slipped 0.3 percent. Australia’s S&P/ASX 200 Index fell 0.8 percent as minerals explorer BHP Billiton Ltd. sank. New Zealand’s S&P/NZX 50 Index added 0.2 percent.

The Hang Seng Index slid 0.1 percent, while a gauge of Chinese mainland stocks listed in Hong Kong declined 0.4 percent, still heading for the biggest monthly gain among global peers. Banks and insurers have led the advance. The Shanghai Composite Index added 0.4 percent.

India’s S&P Sensex index gained for a third day, as a gauge of Indian mid-cap shares advanced to a record.

Futures on the S&P 500 Index were little changed. The U.S. equity benchmark’s monthly gain almost vanished as Apple declined after the European Union found that the maker of the iPhone owes Ireland more than $14 billion in back taxes.

West Texas Intermediate is poised for the biggest monthly advance since April amid speculation talks among OPEC members in Algeria next month may result in action to stabilize the market.

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