Asian stocks drop as investors avoid risk before Yellen speech

Stocks moved to the downside on Thursday with weakness in healthcare and consumer names. Fed Chair Janet Yellen is set to speak in Jackson Hole, Wyoming on Friday.
A man is reflected on a stock quotation board outside a brokerage in Tokyo.
A man is reflected on a stock quotation board outside a brokerage in Tokyo. PHOTO: REUTERS

WELLINGTON (BLOOMBERG) - Asian stocks extended their weekly loss on Friday (Aug 26) ahead of a speech by Federal Reserve Chair Janet Yellen later in the day that may shed light on the US interest-rate outlook. The yen meandered after Japanese consumer prices fell more than economists had predicted, while US crude oil held above US$47 a barrel.

Japan's Topix index dropped the most in a week as shares declined in Australia and South Korea. Futures foreshadowed gains in China and Hong Kong, while S&P 500 Index contracts were little changed following a second day of losses in U.S. shares.

Japan's currency was headed for its first weekly loss versus the dollar in more than a month as Fed funds futures indicated a 57 per cent chance of a Fed rate hike this year. US crude held on to Thursday's rebound on a report that Iran will take part in Opec talks next month.

Ms Yellen will speak at the Kansas City Fed's annual mountain retreat in Jackson Hole, Wyoming, with investors hoping for some description of the economy in the chair's first public comments since June, as well as clarity over the US rate outlook. Wagers on higher rates have been boosted this week, even as evidence of uneven global growth casts doubt over the Fed's ability to diverge from other central banks. Expected US stock volatility, while still below this year's average, has ticked up over the last four days on speculation Jackson Hole will provide a catalyst for markets.

"After a week where most markets have barely moved from where they started, there are likely a number of traders who would relish a bit of volatility this evening," Angus Nicholson, a markets analyst at IG Ltd. in Melbourne, said in an e-mail to clients. "There is certainly fear evident in markets that Janet Yellen is going to be surprisingly hawkish and talk up a September hike."

The MSCI Asia Pacific Index was down 0.4 per cent as of 9:21 am Tokyo time, headed for a 0.5 per cent weekly loss. The Topix lost 0.9 per cent, Australia's S&P/ASX 200 Index dropped 0.5 per cent and South Korea's Kospi index fell 0.6 per cent.

Futures on the S&P 500 were little changed after the underlying measure slipped 0.1 per cent on Thursday. Contracts on Hong Kong's Hang Seng Index gained 0.3 per cent and those on the FTSE China A50 Index added 0.2 per cent, latest prices show.

Commodities West Texas Intermediate crude was little changed at US$47.36 a barrel after rising 1.2 per cent last session.

While still headed for its first weekly loss this month, WTI pared declines on Thursday after a state news service said Iranian Oil Minister Bijan Namdar Zanganeh will participate in an informal meeting of the Organization of Petroleum Exporting Countries in Algiers next month. Saudi Arabian Energy Minister Khalid Al-Falih also said a freeze on oil output would be "positive" - should it happen - as many countries are already producing at their capacity and have limited room to increase supply in the short-term.

Gold for immediate delivery was steady at about US$1,322 an ounce, set for a 1.4 per cent weekly loss that would mark its worst performance in more than a month.

The yen was little changed at 100.45 per US dollar, set for a 0.2 per cent week decline. The fifth straight month of consumer-price declines underscores the challenges facing the Bank of Japan, with Friday's data the last on this key measure before policy makers meet to consider a potential policy revamp on Sept. 20-21.

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, slipped 0.1 per cent for a second day, still on track for a 0.3 per cent advance in the week.