TOKYO: Asian stocks fell for the first time in three days and the dollar strengthened against all of its major peers on prospects for a U.S. interest-rate hike. Japanese shares and the yen fluctuated as investors weighed whether better-than-expected economic growth reduces the need for stimulus.
Nine out of 10 industry groups retreated on the MSCI Asia Pacific Index, which lost ground on all but three days over the last three weeks. Japanese shares swung from a loss to a gain as investors, while the yen did the reverse. A gauge of the greenback’s strength climbed to the highest since March as Australia’s dollar and South Korea’s won lost 0.5 percent or more. Crude oil traded above $48 a barrel before data that’s forecast to show a drop in American stockpiles.
Global equities have struggled to extend gains since reaching this year’s high on April 20 as investors scrutinize U.S. data for clues on the timing of the Federal Reserve’s next interest-rate increase. Odds of a June hike tripled to 12 percent on Tuesday, Fed Funds futures show, as central bank officials commented on prospects for borrowing costs to be raised and U.S. data showed quickening inflation and a pickup in new-home construction. The authority will release the minutes of its April policy meeting on Wednesday.
“Fed officials have come out all sounding hawkish and that tone is likely to continue,” said Naohiro Nomoto, an associate for currency trading at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “The FOMC minutes aren’t likely to be too dovish.”’
Japan’s economy grew an annualized 1.7 percent last quarter, beating estimates estimates for 0.3 percent growth, and averting a recession. The figures support the Bank of Japan’s surprise decision at its last meeting to forgo additional monetary stimulus. The focus now shifts to whether Prime Minister Shinzo Abe will push ahead with a planned sales-tax increase. The market was boosted on Monday by a Nikkei newspaper report over the weekend that the government was planning to delay the tax hike.
Euro-area inflation data are also due Wednesday, while companies reporting earnings include Cisco Systems Inc., SABMiller Plc and Tencent Holdings Ltd. Finance ministers and central bank governors from the Group of Seven countries will meet April 20-21 near Sendai, Japan, to discuss currency tensions, the limits of monetary policy, and the need for more fiscal spending.
The MSCI Asia Pacific Index lost 0.3 percent as of 11:58 a.m. Tokyo time. Futures on the S&P 500 were little changed following a 0.9 percent decline in the U.S. benchmark on Tuesday.
Benchmarks declined across most of Asia, including in Hong Kong, Shanghai and Sydney. Japan’s Topix index rose 0.8 percent, after earlier falling as much as 0.6 percent.
The GDP report “makes it harder to delay the sales tax,” said Seiichiro Iwamoto, a senior fund manager at Mizuho Asset Management Co. in Tokyo. “The market’s core stance right now is that they should not raise it. We’ll be watching very closely what the government says next.”
The yen weakened 0.1 percent versus the dollar, after earlier gaining as much as 0.4 percent.
The Bloomberg Dollar Spot Index advanced 0.2 percent. Atlanta Fed President Dennis Lockhart and San Francisco’s John Williams said Tuesday two interest-rate rises may be warranted this year, while Dallas Fed President Robert Kaplan said a move could come soon. The Aussie lost 0.5 percent, while the won dropped 0.6 percent and South Africa’s rand slid 0.8 percent.
“The recent Fed comments and data point to a U.S. rate hike and this has strengthened the preference for safer assets,” said Suh Dae Il, an analyst at Daewoo Securities Co. in Seoul.
West Texas Intermediate crude added 0.3 percent to $48.45 a barrel, extending gains at a seven-month high. Analysts foresee a 3.5 million-barrel drop in U.S. inventories for last week, which would cap the first two-week decrease since September, according to a Bloomberg survey before Energy Information Administration data due Wednesday.
