Asian Stocks Retreat Before Fed as Material Shares Lead Losses

  • S&P 500 index declines Tuesday as energy stocks slide
  • Traders see a 4% chance U.S. central bank will raise rates

Asian stocks followed U.S. shares lower as energy companies led declines and investors awaited a Federal Reserve decision on monetary policy.

Santos Ltd. slipped 4.4 percent in Sydney, pacing losses among the region’s energy producers as crude oil traded near a two-month low. Tsingtao Brewery Co. dropped 4.6 percent in Hong Kong, the most since Sept. 1, as its earnings decline accelerated. Hitachi Metals Ltd. tumbled 12 percent in Tokyo, the biggest one-day loss since December 2008, after posting quarterly profit that fell short of expectations. Tokyo Electron Ltd. jumped 6.6 percent after the maker of chipmaking equipment increased its full-year profit forecast and dividend payout plan.

The MSCI Asia Pacific Index slipped 0.4 percent to 135.29 at 4:03 p.m. in Hong Kong. Decisions from the Fed on Wednesday and the Bank of Japan on Friday come after China cut interest rates last week and European officials signaled a willingness to add to stimulus, helping extend this month’s equity rally. The Fed kept rates near zero last month, opting to delay a rise while they weigh the impact of weaker growth in China and lackluster inflation.

“I don’t think the Fed is going to risk tightening policy this year,” Nader Naeimi, the Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which oversees about $112 billion, said by phone. “It looks like markets have stalled but we still have some cash and if markets pull back we are using that as a buying opportunity. We’re starting to see the pressure abating on earnings.”

Global equity rally stalls after rebound

Chinese stocks in Hong Kong dropped by the most in a month as earnings from Tsingtao Brewery Co. to Jiangxi Copper declined and UBS Group AG cut its forecast for the nation’s growth. The Hang Seng China Enterprises Index fell 1.5 percent, while the Shanghai Composite Index slipped 1.7 percent.

Hong Kong’s Hang Seng Index dropped 0.8 percent. South Korea’s Kospi index lost 0.1 percent. Australia’s S&P/ASX 200 Index retreated 0.2 percent and New Zealand’s S&P NZX 50 Index closed little changed. Japan’s Topix index added 0.3 percent.

While traders are pricing in a 4 percent chance of the Fed raising rates on Wednesday, they are seeking indications from the meeting on the trajectory of borrowing costs and the central bank’s appraisal of the economy. March is the first month for which traders project at least even odds of a boost.

Darker Outlook

Uneven economic data in the U.S. has meant a murkier outlook on how growth will fare under higher rates. A report Tuesday showed orders for business equipment unexpectedly declined in September as tepid global markets gave American companies little reason to expand. Another report showed consumer confidence fell in October to a three-month low, while a separate gauge showed home prices in 20 cities rose at a faster pace in the year ended August.

“Markets fear the Federal Reserve could topple last week’s central bank stimulus-inspired rally,” said Jasper Lawler, a London-based market analyst at CMC Markets Plc. “Activity’s subdued again. A number of disappointing economic reports minimize the already unlikely probability of a Fed rate-rise on Wednesday.”

E-mini futures on the Standard & Poor’s 500 Index rose 0.2 percent on Wednesday. The underlying gauge lost 0.3 percent on Tuesday amid mixed earnings reports. Apple Inc. advanced in after-hours U.S. trading as quarterly profit and sales exceeded analysts’ predictions.

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