Asian stocks down as US tapering possibility looms
Asian stocks extended losses Thursday after an apparent budget deal in the U.S. Congress reinforced expectations the Federal Reserve will cut its monetary stimulus as early as next week.
Japan's Nikkei 225 lost 1.6 percent at 15,265.75 and Hong Kong's Hang Seng dropped 0.7 percent to 23,178.97. China's Shanghai Composite eased 0.1 percent to 2,201.84. Markets were also down in Australia, India, Taiwan and Southeast Asia.
U.S. lawmakers look set to agree on a modest U.S. budget agreement that restores about $63 billion in across-the-board automatic spending cuts and would help prevent another partial shutdown of the U.S. government. The 16-day shutdown in October crimped economic growth and hurt consumer confidence.
Mizuho Bank Ltd. in Singapore said the budget deal, coupled with a strong run of U.S. economic data, raised the probability of the Fed cutting, or tapering, its $85 billion of monthly bond purchases when it meets Dec. 17-18.
"December taper still remains on the table though not our base scenario. We maintain our view that the Fed would need more data to confirm that the economy is strengthening. As such, we think taper could more likely start in March 2014," it said in a market commentary.
The stimulus has kept U.S. interest rates low to encourage economic recovery, and sent a flood of money into stock markets worldwide in search of higher returns. Its potential pullback has jolted markets and added to nervousness in emerging nations about sudden capital outflows.
Some analysts also said the budget deal doesn't prevent another standoff among lawmakers over the debt ceiling, which has to be raised by early February if the U.S. is to avoid defaulting on its debt.
On Wall Street, disappointing earnings from a handful of U.S. companies pushed the stock market to its biggest loss in five weeks.
Health care stocks had some of the biggest declines. Laboratory Corporation of America slumped after cutting its full-year earnings forecast. Quest Diagnostics, a major competitor, also dropped Wednesday.
The S&P 500 index fell 1.2 percent to 1,782.22, the biggest decline for the index since Nov. 7. The Dow Jones industrial average dropped 0.8 percent to 15,843.53.
Benchmark U.S. crude for January delivery was down 6 cents to $97.38 a barrel in electronic trading on the New York Mercantile Exchange. The contract shed $1.07 to close at $97.44 on Wednesday.
The euro rose to $1.3793 from $1.3784 late Wednesday. The dollar rose to 102.55 yen from 102.48 yen.