Asian Stocks Snap Six-Day Gain as Oil Falls, Japan Shares Down

Updated on
  • Crude enters bear market after slumping 20% since June
  • Japan to release details of stimulus after government approval

Will Markets Be Disappointed Over Japan’s Stimulus Plan?

Asian stocks fell for the first time in seven days as Japanese shares closed lower before the government announces details of a stimulus package, while energy companies declined as oil entered a bear market.

The MSCI Asia Pacific Index dropped 0.7 percent to 136.47 as of 4 p.m. in Singapore after closing at an 11-month high on Monday. Energy and consumer-discretionary stocks led losses after crude sank below $40 a barrel on Monday for the first time since April. Japan’s Topix index lost 1.6 percent, closing at a three-week low, as investors weighed earnings and the government was poised to released details on steps to bolster an economy threatened by a strengthening yen and weak consumer spending.

Asian equities have extended their rally in July, which was the best month since March, on the prospect of more global stimulus. The regional gauge has shrugged off the fallout from Britain’s vote to leave the European Union and is up around 3 percent for the year. Still, oil’s drop of more than 20 percent from its June high is muddying the waters and raising concern over the fragility of the global economic recovery.

Crude’s decline “will probably weigh on sentiment a little bit and we may see some risk-off moves associated with that,” said James Woods, a strategist at Rivkin Securities in Sydney. “We’ll have an update from Shinzo Abe in Japan today, just running through the measures of the 28 trillion yen stimulus package. It’s really what’s going to dictate risk sentiment today.”

Stimulus Package

Japan’s government is set to announce 4.6 trillion yen ($45 billion) in extra spending for the current fiscal year on Tuesday, according to a draft of the plan obtained by Bloomberg that was being discussed by ruling party lawmakers ahead of a cabinet meeting. The spending is part of what Prime Minister Abe has flagged as a 28 trillion yen program.

Australia’s S&P/ASX 200 Index resumed declines and dropped 0.8 percent, the most in four weeks, after the nation’s central bank cut interest rates to a record low to spur inflation and support the labor market. New Zealand’s S&P/NZX 50 Index lost 0.4 percent, retreating from a record and South Korea’s Kospi Index slipped 0.5 percent. Singapore’s STI Index decreased 1.4 percent Vietnam’s VN Index was down 1.9 percent.

Inpex Corp. fell 5.5 percent in Tokyo leading declines in energy companies. Kotobuki Spirits Co. dropped 13 percent after first-quarter earnings slumped. Philippine Long Distance Telephone Co. lost 8.2 percent, the most in five months, after cutting its dividend amid a drop in profits.

Trading in Hong Kong’s stocks and derivatives markets was canceled as typhoon Nida lashed the city, disrupting business and flights. The Shanghai Composite Index rose 0.6 percent.

Futures on the S&P 500 Index declined 0.1 percent. The U.S. equity benchmark index retreated 0.1 percent on Monday, with a slump in energy shares outweighing gains in health-care and technology companies.