Asian Stocks Retreat as Stronger Yen Weighs on Japanese Shares

  • Energy companies advance as crude oil climbs for fourth day
  • China, Hong Kong and Taiwan are shut for holidays Thursday

Asian stocks retreated from a six-week high as a strengthening yen pressured Japanese shares, overshadowing gains from energy producers amid a rally in crude.

The MSCI Asia Pacific Index dropped 0.5 percent to 131.72 as of 3:11 p.m. in Hong Kong. Global equities headed for a fourth weekly advance, with the S&P 500 Index edging closer to an all-time high amid speculation borrowing costs will remain lower for longer. Federal Reserve Chair Janet Yellen signaled Monday that policy makers won’t prematurely raise interest rates. Markets in China, Hong Kong and Taiwan are shut for holidays on Thursday.

“Monetary policy remains accommodative globally and expectations for a rate hike in the U.S. have been pushed back,” James Woods, an analyst at Rivkin Securities in Sydney, said by phone. “That should be supportive of equities. However, a delay in the Fed rate hike is strengthening the yen, providing a headwind for Japan.”

Central banks are in the spotlight, with policy decisions from the Fed and the Bank of Japan scheduled for next week. Futures traders lowered the possibility of a U.S. interest rate hike by July to 18 percent after Yellen said Monday that the world’s biggest economy is strengthening enough to withstand gradual increases in borrowing costs.

The Reserve Bank of New Zealand left the benchmark interest rate unchanged for a second straight meeting Thursday and signaled there may be a need for further easing. South Korea’s central bank unexpectedly cut the key interest rate to a record low amid concern the government’s push to restructure indebted companies is putting pressure on the economy.

Languishing Volumes

Japan’s Topix index dropped 1 percent as the yen headed for a third day of gains against the dollar. Japanese stocks volumes have languished since the start of May as investors await a monetary policy decision from the BOJ on June 16, a day after the Fed’s meeting.

Australia’s S&P/ASX 200 Index finished 0.2 percent lower. New Zealand’s S&P/NZX 50 Index lost 0.3 percent. Philippine stocks slid from a one-year high. South Korean equities halted their longest rally since March, while the nation’s construction companies advanced after the surprise monetary easing. Singapore’s Straits Times Index slipped 0.1 percent.

Insurers led losses in Tokyo, with Dai-ichi Life Insurance Co. and T&D Holdings Inc. declining at least 2 percent, as the slide in global yields clouded the outlook for investment income. Amcor Ltd. tumbled 8.1 percent in Sydney after the supplier of tobacco packaging materials said it will incur a $350 million charge as it revamps operations in Venezuela. Hyundai Development Co. Engineering & Construction rose 2 percent in Seoul, on speculation home builders will benefit from lower borrowing costs. Inpex Corp. climbed 2.6 percent, pacing gains among energy producers.

China Data

China, Hong Kong and Taiwan markets are shut for holidays. Investors in Hong Kong-listed Chinese shares are finally seeing some light. The Hang Seng China Enterprises Index has risen for nine days in a row through Wednesday, notching up a gain of 5.9 percent and capping its longest winning streak since March 2007. 

Chinese economic data released this week provided mixed signals on the outlook for growth. While China’s imports slipped 0.4 percent from a year earlier, the smallest drop since late 2014, overseas shipments fell 4.1 percent, the most in three months, the customs administration said Wednesday. A separate report Thursday showed deflationary pressures in China’s industries eased further in May.

“We continue to see some signs of stabilization in China,” Rivkin’s Woods said. “It’s not great but its not terrible.”

Futures on the S&P 500 Index fell 0.2 percent. The U.S. equity benchmark rose 0.3 percent on Wednesday to the highest close since July, coming within 0.6 percent of a record.

West Texas Intermediate crude for July delivery climbed 0.5 percent, extending gains for a fourth day after government data showed U.S. inventories fell a third week and a new wildfire prompted Canadian producers to shut output.

Before it's here, it's on the Bloomberg Terminal.