Japanese stocks tumbled, entering a correction, as the yen strengthened. U.S. and European equity-index futures fell before economic data that may bolster the case for the Federal Reserve to pare stimulus. Australia’s dollar and gold climbed.
The Topix Index closed down 3.8 percent, taking its decline from the recent peak to more than 10 percent. The MSCI Asia Pacific Index lost 1.7 percent at 7:41 a.m. in London. Futures on the Euro Stoxx 50 Index and the Standard & Poor’s 500 Index slid 0.4 percent. The yen rose 0.5 percent to 100.65 per dollar. Australia’s currency appreciated 0.5 percent after an unexpected gain in building permits reduced chances of an interest-rate cut. Treasuries, headed for the steepest monthly loss in three years, were little changed. Gold added 1.1 percent.
The U.S. economy grew at an annualized 2.5 percent pace in the first quarter, unchanged from a preliminary reading last month, while pending home sales rose in April, data may show today, based on Bloomberg economist surveys. The world’s largest-economy also plans to auction $29 billion of seven-year securities. Official reports will show economic confidence in the euro area increased this month, according to another survey. The Topix is headed for its first monthly decline since August.
“It’s difficult for the market to keep rallying,” said Angus Gluskie, managing director at White Funds Management Pty in Sydney. “Apart from volatility caused by the currency and bonds, we are at a juncture where further moves from Japanese equities need to be fundamentally driven.”
Faster Growth
Utilities and industrial companies led declines on MSCI’s Asia Pacific index, which has lost 4.5 percent this month. That would be its biggest retreat in a year. The Topix’s tumble today pared its advance for this year to 32 percent. Australia’s S&P/ASX 200 Index fell 0.9 percent while Hong Kong’s Hang Seng Index slid 0.5 percent.
The Philippine Stock Exchange Index plunged 3.6 percent, the most in a year, even as the Southeast Asia nation’s economy grew 7.8 percent in the first quarter, the fastest in almost three years and topping estimates in a Bloomberg survey.
The yen advanced a second day. Investors in Japan sold a net 1.12 trillion yen ($11 billion) of foreign bonds in the week ended May 24, the most since the period ended April 5. They sold 800 billion yen of overseas debt in the week to May 17.
The Aussie gained 0.5 percent to 96.82 U.S. cents. Interest-rate swaps data compiled by Bloomberg show traders see a 22 percent chance the Reserve Bank of Australia will lower its benchmark rate to 2.5 percent at its next meeting, down from a 48 percent chance earlier. Building approvals rose 9.1 percent in April, the statistics bureau said. The median estimate of economists in a Bloomberg survey was for a 4 percent increase.
Dollar Weakens
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against currencies of six major U.S. trading partners, slid 0.4 percent to 83.359. It reached 84.498 on May 23, the highest since July 2010.
Treasuries tumbled 1.8 percent in May as of yesterday, the most since December 2009, according to Bank of America Merrill Lynch indexes. U.S. government securities slid after Federal Reserve Chairman Ben S. Bernanke said last week the central bank may cut the pace of its debt purchases known as quantitative easing if policy makers are confident that improvement in the economy will be sustained.
“What’s driving the markets in the very short term is reassessment of the prospects of Fed QE and tapering,” Thio Chin Loo, a senior currency analyst at BNP Paribas SA in Singapore, said in a Bloomberg Television interview. Month-end adjustments of currency positions could distort “fundamentals in the marketplace.”
Benchmark 10-year yields increased less than one basis point to 2.12 percent today. Securities in the Bank of America Merrill Lynch Global Broad Market Index have fallen 1.5 percent in May, poised for the steepest loss since April 2004.
The S&P 500 has risen 3.2 percent since April 30 and is poised for a seventh straight monthly gain, its longest rally since 2009.
To contact the reporters on this story: Richard Frost in Hong Kong at rfrost4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net