Asia: Stocks drop ahead of Fed, Bank of Japan policy meetings

[SYDNEY] Asian stocks fell as suppliers to Apple Inc declined and earnings from Canon Inc disappointed investors, while fund managers awaited policy decisions from the Federal Reserve and the Bank of Japan.

The MSCI Asia Pacific Index dropped 0.5 per cent to 131.69 as of 11:16 am in Tokyo. The gauge is up about 17 per cent from this year's low in February amid optimism the Fed will be patient with increases to interest rates, while Japan's central bank steps up measures to shore up its economy.

Suppliers to Apple slipped after the smartphone maker posted its first quarterly revenue drop in more than a decade and forecast another decline in the current period. iPhone parts maker Alps Electric Co fell 2.1 per cent, while Murata Manufacturing Co slipped 3.9 per cent in Tokyo.

iPhone sales in China, Taiwan and Hong Kong fell 26 per cent in the period, a major shift from just a couple of years ago, when sales in the region were more than doubling with regularity.

"It's pretty disappointing," Angus Nicholson, a Melbourne-based market analyst at IG Ltd, said by phone. "These aren't good numbers out of the China segment which people are most concerned about, and if that continues to play out it will be a concern going forward. Certainly in the Asian session you're going to see investors of those suppliers digest those numbers."

Japan's Topix index lost 0.8 per cent. Canon was the second- biggest drag on the Topix after cutting its full-year operating profit forecast by 17 per cent. A majority of analysts surveyed by Bloomberg predict the BOJ will boost its buying of exchange- traded funds on Thursday. Some 108 companies on the Topix report earnings Wednesday.

With policy makers and investors assessing data to judge the strength of the US economy, a report Tuesday showed orders for US durable goods climbed less than expected in March. A separate reading on home prices in 20 US cities rose less than forecast in February from a year earlier, while consumer confidence decreased more than predicted in April.

"We may see weaker volume as investors hold off ahead of the Fed meeting today and the BOJ tomorrow," IG's Mr Nicholson said. "Speculation is pretty high that we're going to see some sort of announcement of further easing from the BOJ, particularly with regard to an increase in ETF purchases, a benefit to the equity market."

E-mini futures on the Standard & Poor's 500 Index slipped 0.2 per cent after the underlying gauge rose 0.2 per cent Tuesday as a rally in oil prices boosted commodity producers. Crude extended gains on Wednesday from the highest level in more than five months as U.S. industry data showed a decline in stockpiles.

Apple shares fell as much as 8.3 per cent in after-hours US trading. Sales in the third quarter, which ends in June, will be US$41 billion to US$43 billion, the Cupertino, California-based company said Tuesday in a statement. On average, analysts estimated revenue of US$47.4 billion, according to a Bloomberg survey.

Australia's S&P/ASX 200 Index gained 0.8 per cent after bets surged that the central bank will cut interest rates next month. Inflation unexpectedly slowed in the first quarter, a report showed Wednesday.

South Korea's Kospi index and New Zealand's S&P/NZX 50 Index both slid 0.2 per cent. Singapore's Straits Times Index fell 0.5 per cent. Hong Kong's Hang Seng Index lost 0.1 per cent, while the Hang Seng China Enterprises Index of mainland stocks traded in the city rose 0.2 per cent. The Shanghai Composite Index was little changed.

BLOOMBERG