TOKYO, Aug 7 — Asian stocks dropped, with a regional benchmark gauge heading for the biggest decline in a week, after US trade data fueled concern the Federal Reserve may reduce its unprecedented economic stimulus this year.

The MSCI Asia Pacific Index slipped 0.8 per cent to 134.70 as of 9:05am in Tokyo, before markets in China and Hong Kong open. Japan’s Topix index dropped 1.9 per cent as the yen touched a six-week high against the dollar. Futures on the Standard & Poor’s 500 Index lost 0.1 per cent.

The US trade deficit narrowed more than forecast in June to the least since October 2009, the Commerce Department said yesterday, spurring the S&P 500 to its biggest decline since June 24 as investors weighed whether the stronger data would encourage the Fed to start reducing its US$85 billion (RM276 billion) in monthly bond purchases. The Bank of Japan will keep policy on hold at a two-day meeting starting today, according to all 27 economists surveyed by Bloomberg.

Futures on Hong Kong’s Hang Seng Index slid 0.6 per cent in the most recent trading session. The measure fell 3.2 per cent this year through yesterday, the worst performance among developed markets tracked by Bloomberg. The Bloomberg China-US Equity Index of the most-traded Chinese shares in New York dropped 0.7 per cent yesterday.

The MSCI Asia Pacific Index advanced 1.3 per cent last month, its first increase since April, after China pledged to do more to support a transition from reliance on exports to domestic demand in the world’s second-largest economy. Shares on the gauge traded at 13.2 times estimated earnings yesterday, compared with 15.4 times for the Standard & Poor’s 500 Index and 13.8 times for the Stoxx Europe 600 Index.

Stronger economy

Economists at Goldman Sachs Group Inc. and Barclays Plc raised their estimates for second-quarter US gross domestic product, citing the trade report.

Fed Bank of Chicago President Charles Evans, who has been among the strongest proponents of record monetary accommodation, said yesterday he “would clearly not rule” out a decision to begin dialing back the purchases in September.

German factory orders increased by the most in eight months and UK industrial production beat forecasts in June, adding to evidence of a nascent recovery in Europe, separate reports showed yesterday. Italy’s economic contraction slowed.

Of the 314 companies on the MSCI Asia Pacific Index that have posted quarterly results since July 1 and for which estimates are available, 51 per cent exceeded estimates, according to data compiled by Bloomberg. More than 30 companies on the gauge are scheduled to report earnings today, including Mitsui Fudosan Co. and Noble Group Ltd. — Bloomberg