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Asia: Stocks extend losing streak to sixth day as Japan falls

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[SYDNEY ] Asian stocks fell for a sixth day, the longest losing streak since May, as the outlook for global central bank stimulus grew uncertain. Japanese banks weighed on the region's benchmark equity index amid concern the country will deepen its negative interest rate policy.

The MSCI Asia Pacific Index lost 0.3 per cent to 136.21 as of 9:08am in Tokyo. The gauge is trading at the lowest level in five weeks after valuations this month climbed to the highest in more than a year and investors placed a higher probability of less monetary stimulus globally.

That's triggered a surge in volatility in the past week in equity markets from Hong Kong to New York. Japan's Topix index slid on bets the central bank will delve deeper into negative interest rates at its meeting next week, hurting earnings prospects at the country's biggest lenders.

"The markets are under pressure," James Audiss, Sydney-based senior wealth manager at Shaw and Partners Ltd, which oversees about US$7.5 billion, said by phone.

"Volatility is here to stay going into the back-end of the year with central bank meetings and the US election coming up."

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The Asian benchmark equity measure's 4.2 per cent slide from this year's peak on Sept 7 comes as investors speculate on what's in store at next week's policy meetings at the Federal Reserve and the Bank of Japan.

Morgan Stanley said it now expects the BOJ to go further into negative interest rates and increase its asset purchasesmarginally. The Nikkei newspaper reported the rate plan on Wednesday.

In the US, conflicting messages over policy from Fed officials have perplexed the market, with bets on an interest-rate hike next week down two percentage points from a week ago to 20 per cent. Fed board member Lael Brainard said earlier this week that she sees no reason to rush to raise rates, countering comments by Boston Fed President Eric Rosengren last week, who said the US economy could overheat if the central bank waited too long to boost borrowing costs.

Japan's Topix index fell 0.7 per cent. The yen fluctuated after some central-bank officials told Bloomberg News that they still favour stepping up purchases of government bonds if the board decides it needs to expand stimulus, suggesting that cutting a key interest rate deeper into negative territory, or expanding purchases of risk assets such as real-estate investment trusts, aren't the only options.

Australia's S&P/ASX 200 Index lost 0.1 per cent and New Zealand's S&P/NZX 50 Index added 0.1 per cent. Stock markets in China, Taiwan and South Korea are closed Thursday for holidays.

Futures on Hong Kong's Hang Seng Index added 0.1 per cent, with those on the Hang Seng China Enterprises Index little changed in most recent trading. Contracts on the S&P 500 advanced 0.2 per cent after a rally in the underlying gauge fizzled in afternoon trading Wednesday to close down 0.1 per cent.

"With investors trying to first gauge US and Japanese monetary policy, purchases are being held back," said Mitsushige Akino, an executive officer at Ichiyoshi Asset Management Co.

"We're in a pattern where even marginal selling can easily spark declines." BLOOMBERG

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