Asian Stocks Mixed as Yen Strengthens, Oil Slumps – 7 March, 2017

Asian stocks were mixed as investors continued to assess the staying power of a rally that brought global equities to a record amid speculation the Federal Reserve is ready to raise interest rates. The yen strengthened while oil slumped.

The MSCI Asia Pacific Index fluctuated while trading volumes slumped throughout much of the region. The Topix index retreated even as data showed Japan’s economy expanded more than initially reported in the fourth quarter. Chinese shares traded in Hong Kong climbed as a report showed imports surged. The dollar slipped after a two-day gain, while the yield on 10-year Treasury notes fell after climbing for seven days to reach 2.51 percent.

Trepidation is setting in after one of the steepest post-election rallies in history drove the value of global equities towards $71 trillion amid optimism Donald Trump can spur growth with huge spending projects and lower taxes. That pushed valuations on the MSCI All Country World Index to the highest since 2015, approaching the most expensive ever.

Data from Tokyo showed Japan’s economy has expanded for four consecutive quarters, the longest run in more than three years. But the growth has been modest and mostly driven by exports, while private consumption at home remains soft. China’s imports jumped 44.7 percent while exports rose 4.2 percent in February in yuan terms, though the results were skewed because of the timing of the week-long Lunar New Year holiday.

Expectations for swings in prices of bonds, currencies and stocks are all falling. Ever since Donald Trump gave his speech to a joint session of Congress last week and Federal Reserve officials including New York Fed President William Dudley ramped up odds of an interest-rate hike this month, volatility metrics across the board have plunged.

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What’s ahead for the markets:

• Mario Draghi probably won’t flinch at Thursday’s ECB meeting even after headline inflation reached its 2 percent target in February. He’s expected to keep QE going until the end of the year with underlying price pressures muted.
• U.S. jobs data for February are due Friday. Employers probably added around 190,000 workers to payrolls, in line with the average over the past six months and a sign of steady job growth, economists forecast.
• Philip Hammond’s U.K. budget arrives Wednesday. The chancellor pledged on Sunday to set aside money to cushion the economy from Brexit.

Here are the main moves in markets:

Stocks

• The MSCI Asia Pacific Index rose less than 0.1 percent as of 1:05 p.m. in Tokyo, with more shares falling than advancing. Japan’s Topix index dropped 0.4 percent, retreating for the third time in four days. The S&P/ASX 200 Index lost 0.2 percent.
• Chinese shares traded in Hong Kong jumped 0.8 percent, while the Hang Seng index added 0.5 percent.
• Contracts on the S&P 500 slipped 0.2 percent. The benchmark index lost 0.3 percent on Tuesday, completing the first back-to-back declines since January. Health-care shares declined after Republicans released details of a replacement for Obamacare and the president tweeted about lowering drug costs for Americans.
• The Stoxx Europe 600 fell 0.3 percent on Tuesday, after a 0.5 percent drop on Monday.

Currencies

• The yen rose 0.3 percent to 113.64 per dollar. The Australian dollar advanced 0.1 percent and the New Zealand dollar added 0.2 percent.
• The Bloomberg Dollar Spot Index declined 0.1 percent.

Bonds

• Yields on 10-year Treasuries fell one basis point to 2.51 percent, weakening for the first time in eight days.
• Australian benchmark yields gained three basis points to 2.85 percent and New Zealand yields climbed two basis points to 3.33 percent.

Commodities

• Gold increased 0.2 percent to $1,218.15 per ounce after declining 0.8 percent in each of the past two trading sessions.
• Oil lost 0.6 percent to $52.82 a barrel as U.S. industry data showed crude stockpiles expanded, adding to an inventory overhang.
• Copper advanced for the first time in five sessions, while iron ore and aluminum also climbed.

Source: Bloomberg