Asian Stocks Outside Japan Fall Before Fed Meeting Concludes

Jun 18, 2014 7:29 am ET

June 18 (Bloomberg) -- Asian stocks outside Japan fell as energy shares dropped ahead of a Federal Reserve policy decision today. The Topix index rose to a five-month high in Tokyo.

Woodside Petroleum Ltd. led energy firms lower after Royal Dutch Shell Plc sold most of its stake in Australia’s second- largest energy producer. Agricultural Bank of China Ltd. sank 2 percent in Shanghai as Chinese shares retreated. Tsuruha Holdings Inc. surged 4.3 percent in Tokyo after the drugstore operator forecast profit will gain 14 percent.

The MSCI Asia Pacific Excluding Japan Index slipped 0.4 percent to 487.74 as of 7:28 p.m. in Hong Kong. The measure this month touched a three-year high amid improving U.S. economic data and indications Chinese growth is stabilizing. Fed policy makers conclude a policy meeting today after data this week showed U.S. manufacturing is expanding and inflation was faster than forecast.

“The U.S. economic expansion is unlikely to be at a sufficient pace that would make the Fed’s growth target achievable,” said Matthew Sherwood, Sydney-based head of investment markets research at Perpetual Ltd., which manages about $29 billion. “Recent housing numbers have been mixed, but the inflation data does not provide the Fed with the assurances it seeks that housing is likely to add to the broader recovery as rates are normalized.”

Regional Gauges

The MSCI Asia Pacific Index, which includes Japan, rose 0.1 percent to 143.62. Japan’s Topix index gained 0.9 percent as Tsuruha surged 4.3 percent to 5,400 yen.

Hong Kong’s Hang Seng Index fell 0.1 percent, while the Shanghai Composite Index slid 0.5 percent, with Agricultural Bank losing 2 percent to 2.52 yuan. House prices rose in just 15 of 70 Chinese cities in May, a survey by the National Bureau of Statistics showed.

Australia’s S&P/ASX 200 Index dropped 0.3 percent and South Korea’s Kospi index declined 0.6 percent. New Zealand’s NZX 50 Index retreated 0.2 percent. Taiwan’s Taiex Index added 0.4 percent, and Singapore’s Straits Times Index gained less than 0.1 percent. India’s S&P BSE Sensex Index tumbled 1.1 percent.

Futures on the S&P 500 were little changed today after the stock gauge rose 0.2 percent yesterday. The U.S. consumer price index increased 0.4 percent in May, the biggest advance since February 2013, after climbing 0.3 percent in April, a report showed yesterday.

Bond Purchases

A pickup in inflation lessens the threat of a prolonged drop in prices that hurts economic growth, giving Fed officials reason to continue to scale back their unprecedented bond-buying program. Continued hiring and faster wage gains will be needed to boost demand and enable consumers to cope with higher prices.

A Commerce Department report yesterday showed builders broke ground on 1 million U.S. homes in May, a 6.5 percent decline. The median forecast of 78 economists surveyed by Bloomberg projected 1.03 million housing starts.

The Federal Open Market Committee will reduce the pace of monthly asset purchases by $10 billion to $35 billion, economists project. Some 62 percent of 58 economists in a Bloomberg survey predict the Fed will halt bond buying at its October meeting.

Officials led by Chair Janet Yellen will release a new set of quarterly forecasts for unemployment, inflation, economic growth and the benchmark federal funds rate when their meeting ends. In March, policy makers predicted their target rate, now close to zero, would be 1 percent at the end of 2015 and 2.25 percent a year later.

Relative Value

The MSCI Asia Pacific Index traded at 13.2 times estimated earnings compared with 16.4 for the Standard & Poor’s 500 Index and 15.5 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Woodside slipped 4.6 percent to A$40.90. Shell’s sale from its almost four-decade-long holding is part of Chief Executive Officer Ben van Beurden’s pledge to accelerate asset sales to free up cash for new projects after taking over from Peter Voser this year.

Aquila Resources Ltd. climbed 7 percent to A$3.35 in Sydney after the coal producer recommended a takeover offer from China’s Baosteel Group Corp. and Australia’s Aurizon Holdings Ltd.