Asian Stocks Drop as Investors Avoid Risk Before Yellen Speech

(Bloomberg) -- Asian stocks fell to a two-week low, led by shares in Japan, as investors showed a reluctance to take on risk before Federal Reserve Chair Janet Yellen’s speech that may provide clues on when the world’s largest economy will raise interest rates.

The MSCI Asia Pacific Index slid 0.5 percent to 138.25 as of 4:10 p.m. in Hong Kong, set for its second weekly drop, its longest losing streak since June. Japan’s Topix index sank 1.3 percent as the yen traded at 100.45 to the dollar. A rally in equities lost steam this month as investors pulled back risk before a speech by Yellen later Friday. Odds that the Fed will boost rates in September has jumped to 32 percent from 18 percent at the end of July, while traders are betting there’s a 57 percent chance of tightening in December.

“Its a wait and see holding pattern now,” said Chris Green, the Auckland-based director of economics and strategy at First NZ Capital Group Ltd. “In some ways, markets may be disappointed if they are looking for clarity for the rate decision. The usual modus operandi would be not to comment explicitly.”

Consumer-discretionary shares and health-care companies led declines among Asian stocks while commodity producers tracked Thursday’s rebound in oil after Iran agreed to an informal gathering of OPEC members.

Japan’s Topix index erased its gains for the week as insurers and carmakers led losses. The yen gained against the dollar after data showed the nation’s July core consumer prices fell 0.5 percent from a year ago. The Topix has retreated 17 percent this year, making the benchmark gauge the second-worst performer among developed markets.

South Korea’s Kospi Index fell 0.3 percent, while Australia’s S&P/ASX 200 Index and New Zealand’s S&P/NZX 50 Index declined 0.5 percent each. Equity measures in Indonesia, India and the Philippines slipped. Vietnam’s VN Index climbed 1.4 percent to the highest since July 19.

Consumer Stocks

Toyota Motor Corp. sank 3.4 percent after Citigroup Inc. downgraded the stock saying recent strength in the yen against European currencies will hurt price competitiveness of vehicles made in Japan. Citigroup also cut its rating on Mazda Motor Corp., which dropped 1.9 percent.

Li & Fung Ltd., the world’s largest supplier of clothes and toys to retailers, slumped the most in three weeks in Hong Kong after profit declined in the first half as global economic headwinds hurt sales.

The Shanghai Composite Index capped its biggest weekly loss in five weeks, led by property developers, on concern China will take steps to cool speculative activity in the nation’s financial markets. Local governments in Shanghai, Beijing and Tianjin are considering new measures to to rein in house prices, according to people familiar with the matter. Hong Kong’s Hang Seng Index had its first weekly drop in four weeks.

Futures on the S&P 500 Index were little changed as of the most recent trading. The U.S. equity benchmark index slumped to a three-week low on Thursday, led by declines in drugmakers.

West Texas Intermediate crude rose 1.2 percent on Thursday after a report that Iran’s Oil Minister Bijan Namdar Zanganeh will participate in an informal gathering of OPEC members next month in Algiers. Saudi Arabia’s energy minister Khalid Al-Falih said an oil-output freeze would be “positive,” while ruling out a production cut.

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

©2016 Bloomberg L.P.