BANGKOK (AP) -- Asian stock markets fell Wednesday, led by a tumble in Tokyo's benchmark, as expectations mounted that the U.S. central bank will begin to phase out its monetary stimulus next month.
Positive U.S. trade data and comments by a Federal Reserve bank regional president increased speculation that the Fed could begin reducing its monthly $85 billion in asset purchases in September. The program has helped keep interest rates super-low in order to spur growth. But it also had the unintended effect of pushing up stock markets, where investors have fled in search of returns that outpace bonds.
Charles Evans, who votes on the Fed's policy as president of the Federal Reserve Bank of Chicago, told reporters Tuesday the Fed was "quite likely" to start reducing purchases this year and didn't rule out a decision being made at the Fed's next meeting in September. That is a sign that Fed officials believes the U.S. economy is strengthening.
On top of that, a sharp decline in the U.S. trade deficit for June suggested the U.S. economy grew this spring at a faster pace than previously estimated, helped by a record level of exports.
Those factors combined have led analysts to the conclusion that a reduction in the Fed's asset purchases will take place sooner rather than later, and that stock markets could be affected.
"In our view, this will continue to put a lid on risk appetite, at least until tapering actually begins," said Anthony Lam at Credit Agricole CIB said in a market commentary.
Japan's Nikkei 225 index sank 2.6 percent to 14,030.69. South Korea's Kospi fell 1 percent to 1,887.44. Australia's S&P/ASX 200 shed 1.5 percent to 5,027.40.
Hong Kong's Hang Seng suffered a more moderate decline, down 0.3 percent to 21,849.17. In the absence of fresh buying incentives, investors were closely watching for company news, analysts said.
"Investor interest will continue to focus on individual shares, which depend on corporate news such as results announcements and also on policy news," said Kwong Man Bun, chief operating office at KGI Securities in Hong Kong.
U.S. stocks closed lower Tuesday after retailers disappointed the market with weaker profit forecasts. The Dow Jones industrial average dropped 0.6 percent, to close at 15,518.74. The S&P 500 fell 0.6 percent to 1,697.37. The Nasdaq composite index dropped 0.7 percent to 3,665.77.
Benchmark oil for September delivery was up 4 cents to $105.34 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.26 to close at $105.30 a barrel on the Nymex on Tuesday.
In currencies, the euro fell to $1.3300 from $1.3311 late Tuesday. The dollar rose to 97.27 yen from 97.16 yen.