SINGAPORE (Bloomberg) - Asian stocks dropped, with the regional benchmark paring its biggest monthly gain since September 2013, as the Federal Reserve downplayed weak U.S. economic growth and kept raising interest rates on the table for later this year.
The MSCI Asia Pacific Index fell 0.5 per cent to 155.69 as of 9:01 a.m. in Tokyo, heading for a 6.4 per cent advance this month. The Standard & Poor's 500 Index slipped 0.4 per cent on Wednesday after data showed the U.S. economy grew just 0.2 per cent in the first quarter, with Fed Chair Janet Yellen attributing part of the slowdown to "transitory factors."
"The jury is still out on whether the weakness points to a more structural slowdown in the economy," said Mark Lister, head of private wealth research at Craigs Investment Partners Ltd. in Wellington. "While plenty of people are expecting the rate hike to be pushed back even to 2016, its important to watch the next piece of economic news to gauge whether the weakness we've seen was a one off or the beginning of a trend."
Analysts had been expecting the U.S. economy to expand 1 per cent in the first three months of the year. A run of disappointing data has cast doubt on how quickly the Fed can meet its goals for full employment and stable prices. Policy makers have said they expect to raise rates this year for the first time since 2006, and that their decision will be guided by the latest data. Economists at Bank of America Corp. cut their second-quarter growth forecast to 2.5 per cent from 3.5 per cent.
TJapan's Topix index dropped 1.1 per cent, its biggest decline in a month, as markets resumed trading after a holiday. Industrial production slid 0.3 per cent in March from a month earlier, compared with estimates for a 2.3 per cent decline.
South Korea's Kospi index lost 0.4 per cent. Australia's S&P/ASX 200 Index declined 0.3 per cent, New Zealand's NZX 50 Index added 0.3 per cent. Markets in China and Hong Kong have yet to open.
Chinese stocks trading in Hong Kong on Wednesday capped their first back-to-back loss in a month, with the Hang Seng China Enterprises Index sliding 0.8 per cent after commodity shares slumped on lower profits and brokerage Citic Securities Co. restricted the number of shares eligible for margin lending. The move comes a day after the China Securities Regulatory Commission warned new stock investors not to overlook the risk of investment losses.