Asian Stocks Drop as BOJ Holds Stimulus; Commodity Shares Fall

  • BOJ keeps its new benchmark rate at negative 0.1 percent
  • Focus now switches to Fed in busy week for monetary policy

Bank of Japan Refrains From Adding Stimulus

Asian stocks retreated for the first time in four days after the Bank of Japan pledged to maintain its stimulus program, with commodity producers and financial shares leading the decline.

The MSCI Asia Pacific Index slid 0.8 percent to 126.88 as of 5:04 p.m. in Tokyo. A rally since mid-February has pared the measure’s loss for 2016 to 3.9 percent, spurred by a rebound in commodity prices and banking shares. Japan’s Topix index reversed gains as the central bank refrained from bolstering its record monetary stimulus as policy makers gauge the impact of the negative interest-rate strategy they adopted in January.

“Monetary policy does not work without fiscal reform,” Brett McGonegal, chief executive officer of Capital Link International, told Bloomberg TV. “You can keep the monetary stimulus going, but if you’re not changing anything and there’s no reform going on, you’re at this point where it’s not going to work. Japan has the ability to influence that.”

BOJ Governor Haruhiko Kuroda and his board kept the target for increasing the monetary base unchanged, and left their benchmark rate at minus 0.1 percent. The decision was forecast by 35 of 40 economists surveyed by Bloomberg. The central bank reiterated that it will boost easing if necessary.

Attention now shifts to the Federal Reserve for indications on the pace of U.S. interest-rate increases. The Federal Open Market Committee is scheduled to release its decision on Wednesday. Fed funds futures indicate there’s only a 4 percent chance the Fed will increase borrowing costs this week, down from 12 percent at the start of this month.

Hong Kong’s Hang Seng Index fell 0.7 percent and the Hang Seng China Enterprises Index of mainland firms listed in the city slipped 0.9 percent. South Korea’s Kospi dropped 0.1 percent and Singapore’s Straits Times Index declined 0.5 percent. Australia’s S&P/ASX 200 Index retreated 1.4 percent, led by banks. Commonwealth Bank of Australia, the nation’s largest, lost 1.8 percent. New Zealand’s S&P/NZX 50 Index rose 0.2 percent. Taiwan’s Taiex index slumped 1.6 percent. India’s S&P BSE Sensex index was down 0.9 percent.

The Shanghai Composite Index eked out a gain in late trading amid speculation state-backed funds continued to intervene to support the market during annual policy meetings. The stock gauge rose 0.2 percent, erasing a loss of as much as 1.4 percent, amid turnover that was 18 percent lower than the average.

Futures on the Standard & Poor’s 500 Index slipped 0.5 percent. The underlying U.S. gauge slid 0.1 percent on Monday in light trading, closing above its average price during the past 200 days for a second session. The S&P 500 has rebounded more than 10 percent since a Feb. 11 low and trimmed its 2016 drop to 1.2 percent, after losses of as much as 11 percent amid concern over China’s economic slowdown and a deepening rout in oil.

U.S. crude fell on Tuesday after dropping 3.4 percent the previous day. Gulf OPEC delegates said major producers are likely to meet in April to discuss a proposal to freeze output at January levels to stabilize the market.

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