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Asian stocks drop as Japan losses offset emerging-market gains

Singapore - Most Asian stocks fell, with Japanese exporters sliding as weak US payrolls data sent the dollar plunging against the yen. Emerging markets rallied amid speculation the Federal Reserve will delay raising rates.

The MSCI Asia Pacific Index dropped 0.2% to 129.46 as of 11:31 in Tokyo, paring losses of as much as 0.5% earlier. The 38 000-worker increase in non-farm payrolls was less than the most pessimistic of forecasts in a Bloomberg survey of economists, damping an unsteady recovery in global equities and sending the yen surging the most in more than a month on Friday. The probability of the Fed raising benchmark rates by July slid to 27% after the jobs data, from more than 50% a week ago.

“The yen strength isn’t going to help Japan,” Tim Schroeders, a Melbourne-based portfolio manager at Pengana Capital, who helps oversee about $1.2bn in assets, said by phone. “At the moment, whatever Japan is doing domestically in terms of policies is superseded by external machinations. Should the Fed delay raising rates, we may very well see further outperformance from these emerging markets versus developed markets.”

Japan’s Topix index dropped 1.2% as the yen traded at 106.79 to the dollar, after strengthening 2.2% on Friday. Japanese exporters slipped, with Honda Motor and Sony dropping at least 1.1%. Banks slumped, with Mitsubishi UFJ Financial Group retreating 2.1%.

Japanese stocks have been battered this year as a global equity rout that began at the start of 2016 sent the yen higher, while the Bank of Japan’s efforts to boost stimulus by implementing negative rates hurt bank shares. Prime Minister Shinzo Abe last week said the country will delay a planned sales tax increase, which had been scheduled for next April, on concern consumption isn’t strong enough to handle a higher levy. Attention will turn to the BOJ’s policy meeting next week for signs on whether the central bank will add to stimulus to reach its 2% inflation goal.

The MSCI Emerging Markets Index climbed 0.5%, with equities in the Philippines, Indonesia and Malaysia pacing gains. The FTSE Bursa Malaysia KLCI index added 0.4% as the ringgit surged the most in two months.

“The weak US jobs data gives emerging markets another day to live,” said Jonathan Ravelas, chief market strategist at BDO Unibank in Manila. “This could make investors more courageous to push markets higher.”

China’s Shanghai Composite Index was little changed. Singapore’s Straits Times Index gained 0.5%. Hong Kong’s Hang Seng Index fell 0.3%. Australia’s S&P/ASX 200 Index climbed 0.9%. Markets in South Korea and New Zealand are closed for a holiday.

Futures on the S&P 500 Index dropped 0.1%. The US equity benchmark index slipped 0.3% on Friday after declining as much as 1% after the jobs report. The employment data come amid a high-stakes month for global markets, with anxiety over the UK potentially voting to exit the EU adding to concerns.

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