Asian Stocks Retreat as Stronger Yen Drags Down Japanese Shares

(Bloomberg) -- Asian stocks fell for the first time in six days as Tokyo shares dropped on a stronger yen after Japan delayed a sales-tax increase, overshadowing gains in Taiwan, Indonesia and the Philippines.

The MSCI Asia Pacific Index slid 0.3 percent to 128.80 as of 4:07 p.m. in Hong Kong. The gauge sank 1.6 percent last month, the worst showing since a 1.8 percent decline in February, amid investors’ anxiety over the U.S. central bank’s plan to raise interest rates. Japan’s Topix index halted a three-day advance after the yen jumped 0.7 percent.

“Now is not the time to buy actively,” Chihiro Ohta, senior strategist at SMBC Nikko Securities Inc. said by phone. “We have events such as the OPEC meeting, ECB policy decision and the U.S. jobs data coming up.”

The yen traded at 110.13 per dollar after strengthening 0.4 percent Tuesday. The Japanese currency also made gains against the pound amid signs that support for Britain to leave the European Union has increased. The Fed’s rate outlook continues to occupy investors, with traders putting the odds of a hike by July at more than 50 percent.

Japan’s Topix index declined 1.3 percent after reaching the highest level in more than a month on Tuesday. Prime Minister Shinzo Abe said an increase to the consumption levy will be postponed until late 2019, confirming speculation that had swirled for weeks and had helped drive Japanese shares to a one-month high on Monday. The yen made gains and Japanese shares retreated after the announcement.

“There seems to have been a lot of profit taking on the dollar, ” Seiichi Suzuki, a market analyst at Tokai Tokyo Securities Co., said by phone. “Stocks have been affected by moves in the currency market.”

Japan’s Capex

Data from Japan on Wednesday showed that capital spending in the quarter ended March increased 4.2 percent, beating economists’ estimates for a 2.4 percent gain. Company profits for the quarter fell 9.3 percent, while sales sank 3.3 percent.

China’s official factory gauge remained above the dividing line that signals improving conditions for a third month, adding to recent evidence of stabilization in the world’s second-largest economy. Other data showed Australia’s economy expanded at the fastest pace in four years last quarter. Euro-area manufacturing barely grew in May, according to Markit Economics. A manufacturing gauge for the U.S. is due Wednesday.

Investors are also awaiting U.S. jobs data for May, scheduled for release on Friday, as they seek further evidence the economy can withstand an increase in borrowing costs. The increase in nonfarm payrolls is expected to come in at 160,000.

Investors in Asia have been whipsawed this year, with the regional gauge slumping 14 percent through a February low on concern a devaluation of the Chinese yuan would curb global growth and amid prospects for higher U.S. interest rates. It then rallied almost 20 percent through this year’s peak in April before retreating again.

Australia’s S&P/ASX 200 Index dropped 1 percent on Wednesday. New Zealand’s S&P/NZX 50 Index sank 0.2 percent after climbing for five days to a record. South Korea’s Kospi index was little changed.

Hong Kong’s Hang Seng Index declined 0.3 percent, while the Hang Seng China Enterprises Index of mainland firms listed in the city added less than 0.1 percent. The Shanghai Composite Index dropped 0.1 percent, after surging 3.3 percent Tuesday.

Philippine shares climbed 1.3 percent, paced by advances in SM Investments Corp. and Ayala Land Inc. Equity gauges in Indonesia, Taiwan and India increased at least 0.5 percent.

To contact the reporters on this story: Yuko Takeo in Tokyo at ytakeo2@bloomberg.net, Nao Sano in Tokyo at nsano3@bloomberg.net. To contact the editors responsible for this story: Jeff Sutherland at jsutherlan13@bloomberg.net, Chan Tien Hin, Andrew Janes

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