Asian stocks decline as yen weighs on Japan, Fed hawks speak

A pedestrian looks at a quotation board flashing the Nikkei key index from the Tokyo Stock Exchange.
A pedestrian looks at a quotation board flashing the Nikkei key index from the Tokyo Stock Exchange.PHOTO: AFP

SYDNEY (BLOOMBERG) - Asian stocks fell for the first time in three days on Tuesday (May 24), as a stronger yen weighed on exporters in Japan and speculation mounted the US is closer to raising interest rates.

The MSCI Asia Pacific Index lost 0.2 per cent to 125.91 as of 9:04 am in Tokyo. Japan's Topix index slid 0.5 per cent after the yen climbed 0.8 percent against the dollar on Monday.

Australia's S&P/ASX 200 Index traded little changed. New Zealand's S&P/NZX 50 Index lost 0.4 per cent. South Korea's Kospi index retreated 0.3 per cent.

Overnight the S&P 500 Index slipped 0.2 per cent as an increasing number of Federal Reserve officials appeared to back the case for higher borrowing costs this year. Traders have boosted the probability of higher rates next month to 32 per cent, up from 4 per cent a week ago.

Federal Reserve Bank of St Louis President James Bullard said he doesn't expect a UK vote on European Union membership to influence the US central bank's decision. The San Francisco Fed's John Williams said two to three rate increases this year are still "about right," a sentiment echoed by the Fed's Philadelphia president Patrick Harker. Fed chair Janet Yellen is due to deliver remarks on Friday and the US Federal Open Market Committee meets on June 14-15.

"Markets remain fragile as talks of a US interest-rate hike in June puts some fear on whether global growth will remain resilient," said Niv Dagan, Melbourne-based executive director at Peak Asset Management. Williams and Bullard "both struck hawkish tones. The timing of future Fed rate hikes in the face of a sluggish economy is a major focus among stock investors who have benefited from historically low borrowing costs since the 2008 financial crisis."

Futures on Hong Kong's Hang Seng Index lost 0.2 per cent and contracts on the Hang Seng China Enterprises Index declined 0.3 per cent in most recent trading. Futures on the FTSE China A50 Index gained 0.3 per cent.