Asian Stocks Head for October High After Fed; Tokyo Shares Drop

  • Topix falls as yen strengthens after Fed left rates unchanged
  • China shares edge higher after slumping 1.9% on Wednesday

Asian stocks rose toward a nine-month high after the Federal Reserve left interest rates unchanged and signaled a gradual approach to tightening. The stronger yen drove Tokyo shares lower as investors awaited the Bank of Japan’s policy decision on Friday.

The MSCI Asia Pacific Index added 0.2 percent to 135.02 as of 4:10 p.m. in Hong Kong, its fourth day of increases. The gauge had fluctuated between gains and losses at least four times. Japan’s Topix index declined 1.1 percent, erasing Wednesday’s advance. The BOJ is widely expected to add to stimulus at the end of a two-day meeting. Global equities have been volatile before this week’s central bank policy meetings.

“The Fed’s decisions were expected,” Mitsushige Akino, a Tokyo-based executive officer at Ichiyoshi Asset Management Co. “There’ll be a tug of war between selling on expectations the BOJ will disappoint, and short-covering for individual shares that will push the market up.”

The Fed said risks to the U.S. economy have subsided as the central bank takes stock in the wake of the U.K.’s vote to leave the European Union. Chair Janet Yellen has repeatedly stated that the Fed is likely to raise borrowing costs gradually. In Japan, traders are looking to the monetary policy review, after Prime Minister Shinzo Abe announced a fiscal-stimulus package exceeding 28 trillion yen ($265 billion) in a bid to jumpstart Asia’s second-largest economy.

"We’ve got the fiscal spending package out of the way and that seems to be in line with the sort of upper end of expectations, but we don’t see it being a huge catalyst for markets to move materially higher on the back of that,” said Chris Weston, chief market strategist at IG Ltd. in Melbourne. “I think the move down in dollar yen is probably the bigger issue for Japanese markets today."

Chinese stocks staged an afternoon recovery to edge higher amid speculation a selloff that sent the benchmark equity gauge to its steepest loss in six weeks was excessive. The Shanghai Composite Index closed 0.1 percent higher, reversing earlier losses of as much as 0.8 percent. Hong Kong’s Hang Seng Index slipped 0.2 percent.

Chinese equities sank Wednesday on concern regulators will restrict investments in equities. The China Banking Regulatory Commission is said to be planning a crackdown on the $3.5 trillion wealth management product market. The initial draft states that cash from “mass market” wealth products can only be invested in money or bond markets, and not in domestically listed shares, said a person with direct knowledge of the matter.

Australia’s S&P/ASX 200 Index added 0.3 percent to the highest close since August 2015. Economists expect the nation’s central bank to cut interest rates next week as consumer-price growth in the country remained subdued in the second quarter. New Zealand’s S&P/NZX 50 Index gained 0.1 percent.

India’s S&P BSE Sensex climbed 0.4 percent, heading for the highest close since August 2015, as the Cabinet eased rules that would clear the way for passing the national sales tax bill in parliament.

Japan’s Topix index declined as the yen strengthened 0.8 percent to 104.59 against the dollar. The currency sank 0.7 percent Wednesday. South Korea’s Kospi index lost 0.2 percent and Singapore’s Straits Times Index dropped 0.9 percent. 

Rio Tinto Ltd. climbed 2.1 percent in Sydney, pacing gains among mining companies as copper and iron ore advanced. Hitachi High-Technologies Corp. surged 13 percent in Tokyo after the electronics maker boosted its first-half profit forecast. Fujifilm Holdings Corp. slumped 9.9 percent after posting first-quarter net income that missed analyst expectations.

Futures on the S&P 500 Index rose 0.2 percent. The U.S. equity benchmark index slipped 0.1 percent Wednesday following the Fed’s policy decision, with earnings and the price of crude largely setting the tone for individual shares.

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