Asia stocks take a breather as investors fret Fed might scale back stimulus

BANGKOK – Concerns that the Federal Reserve might start scaling back its stimulus program due to a seeming improvement in the U.S. economy sent Asian stock markets lower Thursday.

Sharp rises in global stock markets this year have been partly fueled by central bank actions to support economies in the U.S., Europe and Japan. Positive signs of growth in the U.S., including data released Tuesday showing improved consumer confidence and housing prices, have helped boost Wall Street stocks to record highs.

However, an improving U.S. economy increases the chance that the Fed might ease back on its massive bond-buying program, known as quantitative easing. The purchase of $85 billion a month in Treasury bonds has helped keep interest rates super-low and been a boon to stock markets, where investors have fled in search of higher returns.

Japan’s Nikkei 225 index fell 2.8 per cent to 13,932.92. Hong Kong’s Hang Seng shed 0.2 per cent to 22,518.85. Australia’s S&P/ASX 200 dropped 1.5 per cent to 4,900.90. Benchmarks in Singapore, Taiwan, Indonesia, and the Philippines also fell. South Korea went against the flow, rising 0.2 per cent to 2,005.99.

The lack of major data releases for the day deprives investors of reasons to wade into stocks, analysts said.

“A lack of first tier data releases today will limit activity although the tone will likely remain relatively downbeat,” said Mitul Kotecha of Credit Agricole CIB in a market commentary.

The latest speculation surrounding the Fed came after the release of positive consumer confidence and housing news on Tuesday. That led investors to fret over the prospect of the Fed reducing its bond-buying.

With the approach of the end of the month, investors also were booking profits.

Benchmark oil for July delivery was up 5 cents to $93.15 per barrel in electronic trading on the New York Mercantile Exchange. The contract for the benchmark grade fell $1.88 to close at $93.13 a barrel on the Nymex on Wednesday.

In currencies, the euro rose to $1.2958 from $1.2934 late Thursday in New York. The dollar rose to 101.23 yen from 101.15 yen.


Follow Pamela Sampson on Twitter at