Asian stocks fell the most in a month and regional bonds joined a global debt selloff after signs central banks in Europe and Japan are starting to question the benefits of further monetary easing. South Korean equities slid with the won after a nuclear weapons test in North Korea.
Technology companies were the biggest drag on the MSCI Asia Pacific Index after Apple Inc. dropped by the most since June. Korean stocks were the region’s worst performers, while Hong Kong shares rallied after China opened up a new channel for its insurers to invest in the securities. European equity index futures were little changed. The euro rose to a two-week high after the European Central Bank on Thursday downplayed the need for more stimulus, rhetoric that torpedoed bonds globally. Oil surged more than 6 percent this week following a surprise plunge in U.S. stockpiles.
Swings in financial markets are largely being dictated by monetary policy outlooks in the world’s largest economies and global equities are on track for a weekly gain after prospects for a September interest-rate hike in the U.S. receded. ECB chief Mario Draghi played down the prospect of an increase in asset purchases on Thursday, a day after his counterpart at the Bank of England signaled he’s in no rush to boost stimulus. The head of the Bank of Japan said a comprehensive review of its policy will take into account the costs as well as the benefits of its actions.
Central bankers in Europe and Japan “probably realize they cannot solve this problem with monetary policy," said Kim Youngsung, the head of overseas investment in Seoul at South Korea’s Government Employees Pension Service, which has $13.6 billion in assets. "They probably need fiscal policy, not just monetary policy.”
More light may be shed on the outlook for U.S. interest rates when regional Fed chiefs for Boston and Dallas speak Friday, while euro-area finance ministers and central bank governors will be meeting in Bratislava. France and Spain are due to report industrial output figures for July, while Turkey has second-quarter gross domestic product data coming.
The MSCI Asia Pacific Index was down 0.6 percent as of 7:09 a.m. London time, trimming this week’s advance to 2.3 percent. Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co. were the biggest contributors to the benchmark’s decline.
“While the ECB disappointed, we could still expect additional stimulus later in the year as there’s so much uncertainty in Europe,” said James Woods, a strategist at Rivkin Securities in Sydney. “Investors will probably sit on the sidelines ahead of the Fed and Bank of Japan policy meetings.”
The Kospi index slid 1.3 percent after North Korea conducted its fifth nuclear arms test. South Korean President Park Geun Hye called the move an act of “maniacal recklessness” and said pressure will be increased on the North to give up its nuclear weapons.
Hong Kong’s Hang Seng Index rose to a one-year high and a gauge of Chinese shares listed in the city rallied for a seventh day. Chinese insurers can buy the city’s shares through an exchange trading link with Shanghai, the industry regulator announced late Thursday, without saying when it would take effect. Hong Kong Exchanges & Clearing Ltd. jumped as much as 7.4 percent, its biggest intraday gain of the year.
Shanghai shares were little changed after data showed China’s factory-gate deflation eased for an eighth straight month and consumer prices rose the least in almost a year.
Futures on the Euro Stoxx 50 Index were steady as were contracts on the S&P 500 Index. The U.S. benchmark slipped 0.2 percent in the last session, led by a 2.6 percent decline in Apple.
The Bloomberg Dollar Spot Index fell 0.2 percent. It dropped 0.9 percent this week after data pointing to slowdowns in hiring and business activity cooled expectations for a U.S. interest-rate increase this month. The chance of a hike dropped four percentage points this week to 28 percent, futures prices show, and the greenback lost ground versus all 10 major peers.
“In order for the dollar to bounce back, rate-hike expectations have to heighten," said Yasuhiro Kaizaki, vice president for global markets at Sumitomo Mitsui Trust Bank in New York. "The market will need fresh factors and that may not come until retail sales next week.”
The won fell 0.4 percent versus the greenback, paring this week’s advance to 1.8 percent. The Bank of Korea kept its benchmark interest rate at a record-low 1.25 percent on Friday and said it’s prepared to intervene to curb volatility in the currency market if herd behavior is evident.
The euro gained 0.2 percent, headed for a weekly gain of about 1 percent. The ECB refrained from adding to its unprecedented stimulus at a policy review on Thursday and Draghi said an extension of its quantitative-easing program wasn’t even discussed. About half of respondents to a Bloomberg survey conducted last week foresaw easing, with almost all the others predicting changes in October or December.
The yuan was down 0.2 percent in Shanghai, set for a third weekly loss. China will allow a gradual depreciation of its currency and policy makers should keep opening up the nation’s capital account despite fund outflows, said Fan Gang, head of the National Institute of Economic Research and an adviser to the nation’s central bank.
The yield on 10-year U.S. Treasuries rose one basis point to 1.61 percent, after climbing six basis points on Thursday. Rates on similar-maturity bonds in Australia and New Zealand rose by at least eight basis points to 1.97 percent and 2.35 percent, respectively.
SoftBank Group Corp. raised 471 billion yen ($4.6 billion) in its biggest yen bond sale on record. The offering comes after the Japanese wireless carrier completed this week its acquisition of British semiconductor designer ARM Holdings Plc for about $32 billion.
Crude oil declined 0.8 percent to $47.25 a barrel in New York, paring this week’s jump to 6.3 percent. U.S. inventories fell last week by the most since January 1999, official data show. The priced climbed since early August amid speculation members of the Organization of Petroleum Exporting Countries and Russia would agree on measures to stabilize the market at talks in Algiers this month.
“The possibility of OPEC and Russia agreeing on an output freeze is low, but there’s a chance they may come to a partial agreement that puts a ceiling on output to accommodate countries that are trying to recover production,” said Hong Sung Ki, a commodities analyst at Samsung Futures Inc. in Seoul.