Asia: Stocks drop as Japan's Topix falls with commodity shares

[SINGAPORE] Asian stocks fell for a second day, following a retreat in global equities, as commodity producers dropped with oil and copper amid lingering concerns about moderate global growth before central bank policy decisions.

The MSCI Asia Pacific Index slipped 0.8 per cent to 130.60 as of 9:10 am in Tokyo, paring this week's advance to 0.6 per cent. Optimism that borrowing costs will remain lower for longer amid modest global economic growth is waning ahead of a string events in the next two weeks.

The looming Federal Reserve and Bank of Japan meetings next week, followed by the vote on Britain's membership in the European Union, have the potential to roil markets.

"The market is looking at a very small chance of the Fed moving next week," Chris Green, the Auckland-based director of economics and strategy at First NZ Capital Group Ltd, said by phone.

"While that's been supportive of risk assets, a delay in the Fed rate hike is also a reflection of weaker economic backdrop. Further weakness in US economic data along with the potential for Brexit would be a cause for concern."

Global equities have rebounded from the lows seen in February as commodities have rallied. Oil has surged more than 90 per cent amid unexpected disruptions and a slide in US output, which is under pressure from the Organization of Petroleum Exporting Countries' policy of pumping without limits.

Japan's Topix index slid 0.8 per cent, after a one per cent drop on Thursday. The measure is headed for a weekly loss of 0.7 per cent. The yen traded at 107.12 per US dollar after strengthening to as much as 106.26 on Thursday.

South Korea's Kospi index dropped 0.3 per cent. Australia's S&P/ASX 200 Index declined 1.1 per cent. New Zealand's S&P/NZX 50 Index retreated 0.1 per cent. Markets in China and Taiwan remain shut for a holiday.

Futures on Hong Kong equities are pointing to a higher open as the market resumes trading following Thursday's holiday. Chinese economic data released this week provided mixed signals on the outlook for growth.

While imports slipped 0.4 per cent from a year earlier, the smallest drop since late 2014, overseas shipments fell 4.1 per cent, the most in three months. A separate report on Thursday showed deflationary pressures in China's industries eased further in May.

Futures on the S&P 500 Index lost 0.1 per cent. The US equity benchmark index slipped 0.2 per cent on Thursday, retreating from a 10-month high, as investors evaluated the gauge's run toward a record amid lingering concerns about the impact of lackluster global growth.

West Texas Intermediate crude for July delivery fell 0.1 per cent in early Asian trading, heading for its second day of declines. Copper futures slumped to the lowest in almost four months as swelling stockpiles added to evidence that demand isn't strong enough to ease a global glut.

BLOOMBERG