Asian Stocks Decline as Yen Weighs on Japan, Fed Hawks Speak

  • Taiwan’s Taiex drops Tuesday following Monday’s surge
  • Fed officials appear to back case for higher interest rates

Asian stocks fell, on course for the lowest closing level in almost seven weeks, as exporters in Japan were weighed down by the yen and speculation mounted the U.S. is closer to raising interest rates.

The MSCI Asia Pacific Index retreated 0.9 percent to 124.99 as of 4:02 p.m. in Hong Kong, with all 10 industry groups declining. The biggest losses came in Japan, China and South Korea, with the benchmark gauges dropping at least 0.8 percent. The S&P 500 Index slipped 0.2 percent on Monday as an increasing number of Federal Reserve officials appeared to back the case for higher borrowing costs this year. Traders have boosted the probability of higher rates next month to 32 percent, up from 4 percent a week ago.

Federal Reserve Bank of St. Louis President James Bullard said he doesn’t expect a U.K. vote on European Union membership to influence the U.S. central bank’s decision. The San Francisco Fed’s John Williams said two to three rate increases this year are still “about right,” a sentiment echoed by the Fed’s Philadelphia president Patrick Harker. Fed Chair Janet Yellen is due to deliver remarks on Friday and the U.S. Federal Open Market Committee meets on June 14-15.

“Markets remain fragile as talks of a U.S. interest-rate hike in June puts some fear on whether global growth will remain resilient,” said Niv Dagan, Melbourne-based executive director at Peak Asset Management LLC. Williams and Bullard “both struck hawkish tones. The timing of future Fed rate hikes in the face of a sluggish economy is a major focus among stock investors who have benefited from historically low borrowing costs since the 2008 financial crisis.”

Japan’s Topix index lost 0.9 percent, with exporters providing the biggest drag to the measure. Toyota Motor Corp. slumped 1.4 percent and Hitachi Ltd. declined 2.4 percent. With equities closely tied to swings in the yen, investors weighed comments from Finance Minister Taro Aso, who said the government has no intention of further lowering the currency to boost competitiveness and absolutely no intention of devaluing the yen in a sustained manner.

A two-day move of 5 yen in either direction would be considered one-way and lopsided, Aso said in parliament on Tuesday. The last time the yen strengthened about 5 yen versus the dollar in two days was after the Bank of Japan left policy unchanged April 28.

Singapore’s Straits Times Index lost 0.6 percent and the FTSE Bursa Malaysia KLCI Index slipped 0.4 percent. Singapore’s central bank on Tuesday ordered closely held BSI SA’s unit in the city state to shut down amid a probe related to a troubled Malaysian state fund, the first time in 32 years it’s withdrawing a license from a merchant bank. Swiss authorities also began criminal proceedings against the financial institution.

The Shanghai Composite Index fell 0.8 percent, its first drop in three days, amid speculation raw-material prices will extend declines as a faltering economic rebound curbs demand. Hong Kong’s Hang Seng Index added 0.1 percent and the Hang Seng China Enterprises Index closed little changed.

Taiwan Slides

The Taiex index retreated 0.5 percent following a 2.6 percent surge on Monday. Moody’s Corp. forecasts the island’s economic growth will be just above 1 percent in 2016. Australia’s S&P/ASX 200 Index slipped 0.4 percent and New Zealand’s S&P/NZX 50 Index lost 0.5 percent. South Korea’s Kospi index retreated 0.9 percent.

Futures on the S&P 500 gained 0.2 percent. As stocks declined Monday, about 5.9 billion shares traded hands on U.S. exchanges, 20 percent below the three-month average. Monsanto Co. rose to a 10-month high after Bayer AG offered to buy it for $62 billion, with the seed maker’s climb boosting raw-material producers.

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