Asia Stocks Fall After Yellen Speech While Japan Shares Rally

(Bloomberg) -- Asian stocks outside Japan fell after Federal Reserve Chair Janet Yellen said the case for raising interest rates is getting stronger. Shares in Tokyo rallied as the yen weakened and the Bank of Japan’s governor vowed to add stimulus if needed.

The MSCI Asia Pacific Excluding Japan Index dropped 0.9 percent as of 4:10 p.m. in Hong Kong, after its first back-to-back weekly decline since June. Indonesian equities led losses, while Japan’s Topix index rose the most in three weeks. Yellen said in Jackson Hole on Friday that the case for tightening policy had strengthened. While she stopped short of revealing the specific timing of a rate move, Vice Chairman Stanley Fischer said a rate increase in September is possible.

Odds of a Federal Reserve rate in September jumped to 42 percent from 22 percent a week ago, with a 65 percent chance in December as central bankers reaffirmed their stance of monetary policy to stop economies from slipping into deflation.

“There will be some mild pressure on markets,” Michael McCarthy, chief market strategist in Sydney at CMC Markets, said by phone. “The Fed remains very much data dependent, and that gives you the next hurdle for global markets which is the U.S. non-farm payrolls on Friday. That now becomes crucial to the near-term direction of markets.”

The Topix index jumped 2 percent at close as electrical appliance and auto makers gained. The yen extended declines after sinking 1.3 percent Friday. The currency for the world’s third biggest economy suffered its biggest single-day drop in more than six weeks Friday as BOJ governor Haruhiko Kuroda reiterated a pledge to ease monetary policy further if necessary, saying in comments at Jackson Hole that he would bolster economic stimulus “without hesitation.”

All 10 industry groups in the Asian-ex Japan gauge fell. Lotte Chemical Corp. slid to a two-month low in Seoul, dragging a gauge of materials producers to a three-week low. South Korea’s Kospi index dropped 0.3 percent, its fourth day of declines, capping the longest losing streak since July. Australia’s S&P/ASX 200 Index sank 0.8 percent, Singapore’s Straits Times Index lost 0.7 percent and New Zealand’s S&P/NZX 50 Index decreased 0.3 percent.

Hang Seng

Hong Kong’s Hang Seng Index lost 0.4 percent, its third drop in four days, as real-estate companies sank on concern rising borrowing costs will dent the city’s property market outlook. A bull-market run in Hong Kong is tiring as an improving U.S. economy scotches Brexit-fueled optimism that higher borrowing costs were a remote prospect. The Shanghai Composite Index was little changed, with a 10-day volatility gauge falling to a two-year low.

Indonesia’s Jakarta Composite Index dropped 1.3 percent, extending declines for the second day. Vietnam’s VN Index added 0.3 percent after earlier surging as much as 1.8 percent toward a 2008 high.

Futures on the S&P 500 Index slipped 0.1 percent. The U.S. equity benchmark index posted its biggest weekly drop since June last week, erasing all its August gains. The market is locked in its tightest trading range since the end of 1965 amid confusion about Fed policy and the outlook for earnings.

To contact the reporter on this story: Choong En Han in Kuala Lumpur at echoong6@bloomberg.net. To contact the editors responsible for this story: Jeff Sutherland at jsutherlan13@bloomberg.net, Chan Tien Hin

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