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 0.8 percent as of 9:12 a.m. in Tokyo, after its first back-to-back weekly decline since June. 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 2.2 percent, the most since July. The yen suffered its biggest single-day drop in more than six weeks on Friday after 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.”
South Korea’s Kospi Index lost 0.5 percent. Australia’s S&P/ASX 200 Index retreated 0.1 percent. New Zealand’s S&P/NZX 50 Index was little changed. Markets in China and Hong Kong have yet to start trading.
Futures on the China A50 Index slid 0.3 percent while the Hang Seng Index gained 0.6 percent in their most recent trading. Chinese regulators are cracking down on speculative trading, with exchanges in Shanghai and Shenzhen opening up investigations into wild stock price swings and halting investor accounts, according to the two bourses’ official micro-blogs.
Futures on the S&P 500 Index slid less than 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.
