Asian markets fell Wednesday after weaker-than-expected Chinese manufacturing data and before the Federal Reserve's policy decision, with Japanese stocks retreating as the yen strengthened and Australian shares pulling back from near five-year highs. Trading volumes were light as many regional markets were closed for Labor Day or other local holidays — including those in mainland China, Hong Kong, India, South Korea, Taiwan and Singapore. Investors were also cautious ahead key central-bank meetings this week. “It certainly feels like there is a ‘calm before the storm' effect at the moment. The [European Central Bank] and the [Federal Open Market Committee] will both sit down this week and nut out cash rates and policy positions alike, and this will drive the May markets," said IG Markets strategist Evan Lucas. Japan's Nikkei Stock Average fell 0.4%, and the broader Topix index lost 0.6%. Australia's S&P/ASX 200 dropped 0.5%, retreating a day after the benchmark ended at its highest level since June 2008. Both markets remained weak after an the official version of China's manufacturing Purchasing Managers' Index (PMI) eased to 50.6 in April from 50.9 in March. “A careful analysis of breakdown reveals stabilized domestic demand and will help alleviate some concerns. Despite the weaker-than-expected PMI today, we still expect major activity indicators to show a moderate growth recovery in April and the second quarter," said Bank of America Merrill Lynch chief China economist Ting Lu. “On policies, we expect overall monetary and fiscal policies to remain accommodative, though we see no need for significant stimulus," Lu said. The FOMC was due to announce its monetary policy decision later Wednesday, while the ECB was widely expected to cut its benchmark interest rate by a quarter-point to a record low of 0.5%. The decline in Tokyo and Sydney came even as the S&P 500 Index ended at a record level for a second straight day overnight in the U.S, aided by corporate earnings. For Japanese stocks, the weak start to May followed a spectacular performance in April, when the Nikkei Average surged nearly 12% to tower over other regional benchmarks, driven by hopes an aggressive monetary policy would weaken the yen and boost corporate profits. Among the major movers in Tokyo on Wednesday, shares of Sharp Corp. tumbled 5% after the Nikkei newspaper reported the company may suffer a bigger net loss than it had forecast for the last financial year ended March 31. Several other exporters also retreated as the U.S. dollar traded lower against the yen for much of the Japanese session. Shares of Nissan Motor Co. lost 1.7%, and Canon Inc. gave up 1.6%. Airline stocks retreated on worries about the financial impact from the grounding of the Boeing Dreamliner jet fleet. Japan Airlines Co. lost 4.4%, and ANA Holdings Co. shed 1.4%. The drop came even as ANA reported a 53% jump in annual profits Tuesday, while Japan Airlines posted a better-than-forecast annual profit of ¥171.67 billion after nearly three years in bankruptcy. Daihatsu Motor Co. shed 0.4% following a Nikkei newspaper report that the company has missed out on sales of 17,000 units of a new compact car due to delays by the Indonesian government. In Sydney, resource-sector stocks remained downbeat after the Chinese PMI data, with diversified mining giant BHP Billiton Ltd. off 1.6% and iron-ore producer Fortescue Metals Group Ltd. 0.6% lower. Banks retreated a day after strong results from Australia & New Zealand Banking Group Ltd. pushed the sector sharply higher. ANZ shares were down 0.5%, while Commonwealth Bank of Australia gave up 0.7%. Marketwatch
