HONG KONG: Asian stocks snapped a two-day rising streak and fell on Thursday after the U.S. central bank hinted at a December interest rate hike, sending short-term U.S. bond yields to 4-1/2-year highs and pushing the dollar broadly up.

A December U.S. interest rate increase, ordinarily a sign of a healthy global economy, would now come at the worst possible time for export-oriented Asian countries which are grappling with the twin effects of a slowing China and shrinking global trade.

MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.4 percent, led by a 1 percent fall in Australian shares. While it has risen 12 percent since end-September, it is still down 10 percent so far this year.

"Emerging markets are facing some stiff headwinds particularly in the form of a historic China transition away from manufacturing-led growth and an entrenched slowdown in global trade," said Jeremy Lawson, senior international economist at Standard Life Investments.

In fresh signs that Asian countries were feeling the heat, central banks from Australia to Thailand voiced caution at their scheduled policy meetings this week while retail sales in Hong Kong fell for the seventh consecutive month.

In her first public comments since the Fed's meeting last week, Federal Reserve Chair Yellen said the U.S. was ready for higher interest rates if upcoming economic data justified them.

"If the incoming information supports that expectation then our statement indicates that December would be a live possibility," she said.

Her measured optimism was in direct contrast with the disappointing state of affairs for company earnings in Asia.

So far, September quarter net income for companies in Asia-ex Japan has missed consensus estimates by 6.5 percent, according to Morgan Stanley while Japan, a relatively bright spot so far, has also faltered. Wall Street shares also slipped on Wednesday, with S&P 500 Index falling 0.4 percent. Futures were pointing to a weak start.