Asia Stocks Fall as Oil Drops, Investors Weigh Higher U.S. Rates

  • Japan and China equities decline amid weaker earnings
  • Fed's Bullard latest policy maker to signal rates may rise

Asian stocks fell, with the regional equities gauge poised for the biggest drop in a month, as oil tumbled below $40 a barrel and investors weighed the direction of U.S. monetary policy.

The MSCI Asia Pacific Index fell 1.1 percent to 127.28 as of 4:15 p.m. in Hong Kong. The measure is heading for its first weekly loss since mid-February. Shares in China and Japan slumped amid weaker corporate earnings. Federal Reserve Bank of St. Louis President James Bullard joined a chorus of policy makers floating the prospect of an interest-rate hike as soon as April should the economic data warrant it.

“Fed officials this week reminded the market that they still want to move forward with the rate hikes,” Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, which manages about $7.2 billion, said by phone. “Investors have been looking for a reason to pull back and this is one. Not surprising given the strong rebound that we’ve seen. Concerns remain about how sharp the slowdown is in China. You still have deflationary pressures and geopolitical risks.”

After halving its projection for rate increases this year to two -- a shift that spurred global stock gains and weighed on the dollar -- the Fed is back in the spotlight as its own officials start to tweak that rhetoric.

Regional Gauges

The Shanghai Composite Index dropped 1.6 percent, closing below 3,000 for the second time this week. Even with a recent rebound, the measure has slumped 16 percent this year, the worst performance among major global benchmark indexes tracked by Bloomberg, amid concern the economic slowdown is deepening and a weaker yuan will spur capital outflows.

Some of China’s largest firms including Anhui Conch Cement Co. and PetroChina Co. reported slumping profits, while smaller companies retreated after a benchmark gauge entered a bull market.

Japan’s Topix index declined 0.7 percent, after swinging between a gain of 0.1 percent and losses of as much as 1.1 percent. Mitsui & Co. tumbled 7.5 percent after the trading company booked more than $2 billion in impairment charges and forecast its first net loss in its modern history. Mitsubishi Corp., Japan’s largest trading company, fell 4.1 percent. After the market closed, the company said it expects to book an impairment charge of $3.8 billion on its commodities business and also forecast a net loss for the year.

South Korea’s Kospi index dropped 0.5 percent. Australia’s S&P/ASX 200 Index lost 1.1 percent. Taiwan’s Taiex index slipped 0.3 percent and Singapore’s Straits Times Index declined 1.2 percent. New Zealand’s S&P/NZX 50 Index retreated 0.1 percent. Financial markets across most of Asia, Europe and North America will be closed Friday for holidays.

Inpex Corp. dropped 5 percent in Tokyo, pacing losses among energy producers as crude oil futures extended declines. Australia & New Zealand Banking Group Ltd. slumped 5.2 percent in Sydney after saying bad debt charges will be higher than previously forecast as low commodity prices impact its resource-industry clients.

E-mini futures on the Standard & Poor’s 500 Index decreased 0.3 percent on Thursday. The U.S. equity benchmark index slipped 0.6 percent on Wednesday as energy producers declined amid the dollar’s longest rally in a month.

West Texas Intermediate crude declined 4 percent on Wednesday, the most in six weeks, as the dollar gained and a government report showed rising oil stockpiles kept supplies at the highest level in more than eight decades. The oil contract for May delivery fell 1.2 percent on Thursday.

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