Asian stocks retreated from an almost five-month high as a stronger yen weighed on Japanese shares and investors assessed earnings.
The MSCI Asia Pacific Index fell 0.6 percent to 133.41 as of 9:01 a.m. in Tokyo. The measure is headed for a 0.9 percent gain this week, its third straight such advance. Alphabet Inc. and Microsoft Corp. missed estimates when they reported profits after regular U.S. trading, while stalling global demand for smartphones made a dent on Sony Corp.’s results. Earnings are the next test for an equity rally that this week pushed global shares to the highest level since December.
“There’s been scant evidence of sustained earnings growth,” said Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about $21 billion. “Persistent yen strength over the medium term will be just another factor weighing on Japanese earnings-per-share growth. It’s too soon to declare that the earnings recession is over in all regions — things look better in the U.S., but central bank policy in Europe and Japan appears increasingly deflationary and the prospect for strong economic recovery in emerging markets is still hard to fathom.”
After a turbulent start to 2016, the rally in Asian shares since mid-February has pushed the dollar-denominated benchmark index back into positive territory. It’s now up 1.1 percent for the year, against a 4.4 percent decline for a measure of European shares and a 2.3 percent gain for the Standard & Poor’s 500 Index. Still, Japanese stocks are the second-worst performers among 24 developed markets tracked by Bloomberg, while the Shanghai Composite Index is down 17 percent.
Japan’s Topix index lost 0.9 percent on Friday, sliding from an almost three-month high, after the yen extended Thursday’s 0.4 percent advance to trade at 109.38 per dollar. South Korea’s Kospi index slipped 0.3 percent. Australia’s S&P/ASX 200 Index fell 0.4 percent. New Zealand’s S&P/NZX 50 Index dropped 0.3 percent. Markets in China and Hong Kong have yet to open.
Futures on the FTSE China A50 Index dropped 0.3 percent in most recent trading, while contracts for the Hang Seng Index slipped 0.6 percent. The Shanghai Composite fell 0.7 percent on Thursday, extending a monthly decline. The March rebound in mainland equities is reversing amid concern that improving economic data and surging credit will prevent the government from adding stimulus.
E-mini futures on the S&P 500 slid 0.1 percent. The U.S. benchmark stock index dropped 0.5 percent on Thursday as corporate earnings provided little incentive for investors to send U.S. stocks higher.
West Texas Intermediate crude gained as much as 0.9 percent in early Friday trading, poised for a third weekly advance as producers suggest the door is still open to agree on limiting supplies after a proposal to freeze output failed on Sunday.