SINGAPORE (BLOOMBERG) - Asian stocks excluding Japan climbed on Wednesday (Sept 7) after weak data on the US services industries bolstered speculation that the Federal Reserve will keep interest rates lower for longer. Shares in Tokyo fell as the yen strengthened.
The MSCI Asia Pacific excluding Japan index rose 0.4 per cent to 458.02 as of 9:13 am in Tokyo.
Carmakers and electric-appliance manufacturers contributed the most to the Topix's decline in Tokyo amid prospects the stronger yen will weigh on Japanese exporters' earnings. The yen extended gains against the dollar on Wednesday to 101.48 after jumping 1.4 per cent on Tuesday.
South Korea's Kospi index added 0.1 per cent, while New Zealand's S&P/NZX 50 Index climbed 0.1 per cent.
Australia's S&P/ASX 200 Index was little changed after the measure slid on Tuesday. The Reserve Bank of Australia left the benchmark interest rate at a record low 1.5 per cent on Tuesday, as forecast by all 26 economists surveyed by Bloomberg. Traders are pricing in a 41 per cent chance of further easing in Australia by the end of the year as they wait to see if US rates rise this month.
US shares advanced, with the Nasdaq Composite Index climbing to a record, as odds the Fed will raise rates at its meeting this month fell to 24 per cent from 32 last week, after a report showed a key services gauge fell to a six-year low. The prospect of US rates staying lower for longer weighed on the dollar against the yen, and Japan's Topix index sank 0.8 per cent.
"The recent string of weak economic data makes it difficult for the Fed to raise rates this month," MR Michael McCarthy, chief market strategist in Sydney at CMC Markets, said by phone. "A hike in December remains a coin toss. If the data deteriorates further, we could be looking at rate hikes in 2017. The flood of easy money will continue to support this equity rally."
The Institute for Supply Management's non-manufacturing index slumped to 51.4, the lowest since February 2010, raising questions about the US economy's strength ahead of the Fed's meeting later this month. The report is the latest in a series of unexpectedly weak data for August, including a contraction in manufacturing and a slowdown in hiring.
Futures on the FTSE China A50 Index gained 0.1 per cent in their most recent trading, while those on the Hang Seng Index slipped 0.3 per cent. The Hong Kong measure has surged 14 per cent this quarter, outperforming the rest of Asia, buoyed by relatively cheap valuations and optimism in the property market.
Futures on the S&P 500 Index were little changed. The underlying US equity benchmark index added 0.3 per cent on Tuesday as it resumed trading following Monday's Labour Day holiday, while the Nasdaq gained 0.5 per cent.