Asian Stocks Outside Japan Rise on Bets Fed Will Keep Rates Low

  • Tokyo shares decline led by exporters as yen strengthens
  • Shanghai Composite Index’s volatility drops to two-year low

Asian stocks rose, with the regional benchmark index trading at a 13-month high, after weak data on the U.S. services industries bolstered speculation that the Federal Reserve will keep interest rates lower for longer. Shares in Tokyo fell as the yen strengthened.

The MSCI Asia Pacific Index rose 0.3 percent to 142.23 as of 4:03 p.m. in Hong Kong, heading for its highest close since July 2015. U.S. shares advanced, with the Nasdaq Composite Index climbing to a record, as odds the Fed will raise rates at its meeting this month fell to 24 percent from 32 last week. The rates outlook weighed on the dollar against the yen, and Japan’s Topix index sank as much as 1 percent before paring losses.

“The recent string of weak economic data makes it difficult for the Fed to raise rates this month,” Michael McCarthy, chief market strategist in Sydney at CMC Markets, said by phone. “A hike in December remains a coin toss. If the data deteriorates further, we could be looking at rate hikes in 2017. The flood of easy money will continue to support this equity rally.”

The Institute for Supply Management’s non-manufacturing index slumped to 51.4, the lowest since February 2010, raising questions about the U.S. economy’s strength ahead of the Fed’s meeting later this month. The report is the latest in a series of unexpectedly weak data for August, including a contraction in manufacturing and a slowdown in hiring.

Japan Exporters

The Topix index dropped 0.2 percent at the close in Tokyo. Exporters including carmakers and electronic-appliance manufacturers contributing to the decline amid prospects the stronger yen will weigh on earnings. The yen extended gains against the dollar on Wednesday to 101.52 after jumping 1.4 percent on Tuesday.

The Philippine Stock Exchange Index slumped 1.3 percent, extending losses for a third day, as foreigners keep pulling money from Asia’s most expensive market amid speculation the outbursts of President Rodrigo Duterte are hurting investor sentiment. The index is down 2.3 percent this quarter, the only decliner among major Asian markets.

New Zealand’s S&P/NZX 50 Index climbed 0.9 percent, extending a record. Australia’s S&P/ASX 200 Index added 0.2 percent after the measure slid on Tuesday. Taiwan’s Taiex index advanced 0.8 percent to the highest since July 2015. Thailand’s SET Index gained 0.8 percent. South Korea’s Kospi index lost 0.2 percent. Hong Kong’s Hang Seng Index fell 0.2 percent.

Calmer Shanghai

The Shanghai Composite Index finished less than 0.1 percent higher, paring gains of as much as 0.5 percent. The measure’s 30-day volatility dropped to the least since August 2014 amid concern state-backed funds are smothering market moves.

The feeble moves in mainland equities come amid increasing speculation of state intervention, with the Communist Party’s top decision-making body pledging to curb asset bubbles and the central bank saying it wants to reduce leverage in financial markets. State-backed funds were seen selling bank shares in mid-August as the Shanghai Composite surged to a seven-month high, while Huaxi Securities Co. said the government probably wants to keep the market above the 3,000 level.

Gome Electrical Appliances Holding Ltd. climbed 7.1 percent in Hong Kong after Macquarie Group Ltd. raised the stock’s rating to outperform. Rakuten Inc. jumped 7.2 percent in Tokyo after the overseers of the Nikkei 225 Stock Average said the Japanese online retailer will be included in the benchmark index next month. Nippon Soda Co., which will be taken out of the measure, plunged 11 percent.

Futures on the S&P 500 Index were little changed. The underlying U.S. equity benchmark index added 0.3 percent on Tuesday as it resumed trading following Monday’s Labor Day holiday, while the Nasdaq gained 0.5 percent.

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