Asian Stocks Decline After Manufacturing Data Clouds Fed Outlook

Asian stocks declined, led by technology and material companies, after U.S. manufacturing unexpectedly contracted, clouding the outlook for the Federal Reserve’s interest-rate outlook.

The MSCI Asia Pacific Index slipped 0.1 percent as of 5:51 p.m. in Hong Kong, with trading maintained in a range between gains and losses of 0.3 percent. The Institute for Supply Management’s index of U.S. manufacturing dropped to 48.6, the lowest level since June 2009, as elevated inventories led to cutbacks in orders and production.

“The ISM manufacturing figures were terrible. They were at a level indicating a recession,” said Chihiro Ohta, general manager of investment information at SMBC Nikko Securities Inc. in Tokyo. “The market’s focus is shifting to the pace of rate hikes in the U.S. That pace is likely to be gradual as the American economy doesn’t seem to be as strong as expected.”

Traders see a 72 percent chance the Fed will raise U.S. interest rates in December, down from 74 percent before the factory data. Investors will next scrutinize Friday’s U.S. payrolls report before the central bank’s meeting on Dec. 15-16.

“The market is finding it hard to interpret the prospects for the Fed rate hike and U.S. economic indicators, which are all over the place,” said Tomomi Yamashita, a fund manager at Shinkin Asset Management Co., which oversees $6.3 billion. “We have more events coming up, and it’s scary to think that volatility may increase.”

Australian GDP

Australia’s S&P/ASX 200 Index fell 0.2 percent. The nation’s economy expanded by 0.9 percent in the third-quarter from the prior three months, government data showed Wednesday, beating economist estimates for a 0.8 percent increase even as domestic demand contracted by half a percent.

Japan’s Topix index closed little changed, with construction shares leading gains and glass makers falling. Euglena Co. jumped 8.8 percent after ANA Holdings Inc., Japan’s largest airline, said it plans to use biofuel made by the algae-products maker.

South Korea’s Kospi index fell 0.7 percent, while New Zealand’s S&P/NZX 50 Index dropped 0.1 percent. Hong Kong’s Hang Seng Index gained 0.4 percent.

The Shanghai Composite Index climbed 2.3 percent, the most in a month, as financial companies rallied on prospects for monetary stimulus. China Life Insurance Co., China Vanke Co. and China Citic Bank Corp. all surged by the 10 percent daily limit.

E-mini futures on the Standard & Poor’s 500 Index added 0.2 percent. The underlying gauge rallied 1.1 percent on Tuesday, with health-care shares pacing gains.

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