Asian Stocks Retreat on Taper Bets While Japan Advances on Yen

  • Investors weigh the prospects that ECB will reduce stimulus
  • Fed officials’ hawkish comments prompt rate-rise bets

Asian stocks outside Japan dropped for the first time in three days on concern central banks will reduce stimulus, while the Topix index climbed after the yen weakened.

The MSCI Asia Pacific Excluding Japan Index fell 0.3 percent to 455.11 as of 4:10 p.m. in Hong Kong, led by losses in Indonesia and New Zealand. Bonds, currencies and stocks were shaken Tuesday after Bloomberg News reported the European Central Bank is likely to gradually taper asset purchases as it ends quantitative easing, citing officials who asked not to be identified. The odds the Federal Reserve will raise interest rates by December climbed to 61 percent on Tuesday, from about 50 percent a week earlier. The Topix added 0.6 percent on Wednesday after the yen fell the most against the dollar in more than a month.

“Equity markets are retreating following hawkish comments from Fed officials and talks the ECB may curb stimulus,” Margaret Yang, an analyst at CMC Markets in Singapore, said by phone. “There are uncertainties remaining. We will see a pick up in volatility ahead of the U.S. elections.”

Investors are scouring the comments of central bankers for any hints of tightening. An informal consensus has built among policy makers in the past month that ECB asset buying will have to be tapered once a decision is taken to end the program, the euro-zone officials said, asking not to be identified because their deliberations are confidential. They didn’t exclude that QE could still be extended past the current end-date of March 2017 at the full pace of 80 billion euros ($90 billion) a month.

Meanwhile, Federal Reserve Bank of Richmond President Jeffrey Lacker urged the U.S. central bank to raise interest rates to head off a likely pickup in inflation that would force bigger increases later.

Japan’s Topix index advanced for a third day, boosted by exporter gains. Toyota Motor Corp. and Panasonic Corp. climbed at least 1.5 percent. The yen has risen 17 percent against the dollar this year, while the Topix is down 13 percent so far, poised for its first annual decline since Prime Minister Shinzo Abe took office in December 2012 with a pledge to boost growth.

South Korea’s Kospi index lost 0.1 percent, Australia’s S&P/ASX 200 Index slid 0.6 percent and New Zealand’s S&P/NZX 50 Index fell 1.1 percent. Hong Kong’s Hang Seng Index climbed 0.4 percent as advances in energy shares overshadowed concerns that global central banks will cut stimulus. China’s mainland markets are shut for the remainder of the week.

A rally in Hong Kong equities that’s made them the hottest in Asia is seen continuing through year-end, buoyed by increased access for mainland funds and a stabilizing Chinese economy. The Hang Seng Index jumped 12 percent last quarter, its best performance since 2009, as flows through an exchange trading link with Shanghai swelled to a record. That was the biggest gain among Asian benchmark indexes tracked by Bloomberg.

Philippine Inflation

Indonesia’s Jakarta Composite Index sank 1.2 percent. The Philippine Stock Exchange Index fell 1 percent as data showed inflation beat estimates to rise to an 18-month high in September. India’s S&P BSE Sensex index retreated 0.3 percent, halting its three-day winning streak. India’s September composite purchasing managers’ index released by Nikkei and Markit Economics fell to 52.4 from 54.6 in August.

The MSCI Asia Pacific Index rose 8.4 percent last quarter, its largest such advance since early 2012. It’s now up 6.6 percent in 2016, helped by a recovery in oil after a turbulent start to the year.

Futures on the S&P 500 Index were little changed. The underlying U.S. equity benchmark index dropped 0.5 percent on Tuesday following hawkish comments from Lacker and Federal Reserve Bank of Cleveland President Loretta Mester.

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