China stocks hit turbulence with Asian shares sinking

Asian Stock Markets

Chinese stocks went into a tail spin on Tuesday as turbulence gripped equity markets in Asia, which sank to nine-month lows as investors feared the Sino-U.S. trade row could derail a rare period of synchronized global growth. 

Speculation was rife the central bank in China was intervening in the currency market to staunch losses and prevent a potentially destabilising sell-off in the yuan.

Chinese financial markets have been jittery ahead of a July 6 deadline, when the U.S. is set to slap tariffs on $34 billion worth of Chinese goods that Beijing has vowed to match with tariffs on U.S. products.

The trade row between the United States and major economies has rattled financial markets in the past several weeks, with no sign U.S. President Donald Trump is about to back down from his ‘America First’ protectionism policies that many fear will harm the global economy.

The Asia Pacific MSCI index ex-Japan .MIAPJ0000PUS tumbled 1.4 percent to its lowest since September 29, while Japan's Nikkei average .N225 was down 0.86 percent to a near three-month low.

Chinese stocks were hit the most, with Hong Kong's Hang Seng index .HSI diving 3.3 percent to its lowest level in ten months, the Shanghai Composite Index .SSEC shedding 1.9 percent to hit a fresh 28 month low.


The Chinese yuan CNY=CFXS, on a downward spiral since mid-June, slipped past 6.7 per dollar in early trading on Tuesday for the first time since Aug. 9, 2017 before paring losses on talk of intervention by the Chinese central bank.

The central bank put the midpoint CNY=PBOC roughly in line with market expectations at 6.6497 yuan per dollar, its weakest level in about 10 months, setting the stage for the day's drop.

The yuan was last traded at 6.6998 per dollar.

Trump told the World Trade Organization on Monday that “we’ll be doing something” if the United States is not treated properly, just hours after the European Union said that U.S. automotive tariffs would hurt its own vehicle industry and prompt retaliation.

Officials in China, the epicentre of the international trade row, have warned the United States that the ti-for-tat tariffs on each others goods will ultimately prove detrimental for American businesses and jobs. L4N1TN1RH

Elsewhere in currency markets, the euro EUR=, which had been pressured by political uncertainty in Germany, pared losses after Chancellor Angela Merkel's conservatives settled a row over migration that threatened to topple her governing coalition after interior minister Horst Seehofer dropped his threat to quit.

The euro last traded at $1.1632 EUR=, after shedding 0.45 percent overnight.

The dollar last stood at 110.82 yen, giving up gains following sharp falls in Chinese shares.

Investors are also keeping an eye on the Reserve Bank of Australia’s (RBA) policy meeting later on Tuesday for any mention of the U.S.-China trade tensions. The central bank is considered certain to maintain rates at 1.5 percent, where they have been since mid-2016.

China is Australia’s major export market and its currency, the Australia dollar, is considered a liquid proxy for China-related risk.

The Aussie dollar was not far off a 1-1/2-year low of $0.7311 AUD=D4 plumbed on Monday, fetching $0.7328.

Oil prices climbed on Tuesday after Libya declared force majeure on some of its supplies, with Brent crude LCOc1 rising 0.83 percent to $77.94 per barrel and West Texas Intermediate (WTI) crude CLc1 was up 0.87 percent to $74.58 a barrel.

Asian Stocks Mixed; Oil Extends Slide

Asian Stock Markets

Asian stocks struggled for traction Monday with energy shares tumbling after oil extended its biggest drop in about a year. The euro rallied after Italy’s president rejected a candidate for finance minister who’s been skeptical of the single currency.

Benchmarks dipped in Tokyo and Australia. South Korean stocks rose, as did U.S. futures, after President Donald Trump appeared to confirm that his June summit with North Korea’s Kim Jong Un was back on.

Hong Kong stocks advanced. Euro Stoxx 50 futures gained.

 The MSCI Asia Pacific Energy Index had the biggest decline after a Saudi minister said petroleum supply would likely rise in the second half. Oil slid further below $70 a barrel while the dollar slipped against most major peers.

Trading may be subdued round the world by U.S. and U.K. holidays Monday.

Investors turn their attention to the economy this week with readings on European inflation, Chinese manufacturing and Friday’s U.S. jobs report, the last before Federal Reserve policy makers meet in June. Italian assets will be in focus after that country sank deeper into political uncertainty, with populist leaders failing in their attempt to form a government.

Elsewhere, the Indonesian rupiah climbed amid speculation of another interest rate hike by the central bank, while the nation’s stocks and sovereign bonds also rallied, with the 10-year yield sliding about 20 basis points.

S&P/ASX 200 Index fell 0.5 percent.
Kospi index rose 0.8 percent.
Hang Seng Index gained 0.7 percent. Shanghai Composite Index fluctuated.
Futures on the S&P 500 advanced 0.5 percent.
Euro Stoxx 50 futures climbed 0.5 percent as of 8:05 a.m. in Frankfurt.
MSCI Asia Pacific Index rose 0.1 percent.
The Japanese yen fell 0.2 percent to 109.60 per dollar.
The rupiah gained 0.9 percent to 13,990 per dollar.
West Texas Intermediate crude plunged 2.4 percent to $66.24 a barrel after tumbling 4 percent on Friday.

China, HK stocks climb on chances of North Korea-U.S. summit

Asian Stock Markets

China and Hong Kong stocks climbed on Monday, on signs the United States and North Korea were still working towards holding a summit.

The CSI300 index rose 0.7 percent to 3,842.47 points at the end of the morning session, while the Shanghai Composite Index gained 0.2 percent to 3,146.85 points.

The Hang Seng index added 0.6 percent to 30,758.49 points, while the Hong Kong China Enterprises Index climbed 0.6 percent to 12,117.39 points.

U.S. President Donald Trump said on Sunday a U.S. team had arrived in North Korea to prepare for a proposed summit between him and North Korean leader Kim Jong Un, which Trump pulled out of last week before reconsidering.

Sentiment was also aided as worries eased over the trade tensions between China and the United States, after U.S. reached a deal to keep China's ZTE in business.

The Trump administration told lawmakers the U.S. government has reached a deal to put Chinese telecommunications company ZTE Corp back in business after it pays a significant fine and makes management changes, a senior congressional aide said on Friday.

Chinese Vice President Wang Qishan said on Friday there would be no winners if there was a trade war between China and the United States, but said Beijing had to be ready for any turn of events.
Investors also found solace after data showed profits earned by Chinese industrial firms in April rose at their fastest pace in six months.

Around the region, MSCI 's Asia ex-Japan stock index was firmer by 0.39 percent while Japan's Nikkei index was up 0.08 percent.

The yuan was quoted at 6.3902 per U.S. dollar, 0.02 percent firmer than the previous close of 6.3917.

The largest percentage gainers in the main Shanghai Composite index were Weilong Grape Wine Co Ltd up 10.03 percent, followed by Changbai Mountain Tourism Co Ltd gaining 10.02 percent and Suzhou Douson Drilling&Production Equipment Co Ltd up by 10 percent.

The largest percentage losers on the Shanghai index were Inner Mongolia BaoTou Steel Union Co Ltd down 8.46 percent, followed by Guangdong Dcenti Auto-Parts Stock Ltd Co losing 8.16 percent and Jiangsu Rutong Petro-Machinery Co Ltd down by 8.09 percent.

The top gainers among H-shares were CSPC Pharmaceutical Group Ltd, which climbed 5.18 percent, followed by PetroChina Co Ltd, which gained 4.63 percent and Air China Ltd that rose 3.83 percent.
The three biggest H-shares percentage decliners were China Gas Holdings Ltd, which fell 4.44 percent, CNOOC Ltd , which dropped 2.0 percent and ZhongAn Online P & C Insurance Co Ltd down by 1.0 percent.

As of 0402 GMT, China's A-shares were trading at a premium of 20.04 percent over the Hong Kong-listed H-shares.

Global stocks and dollar recover; Italy set for big weekly loss

Global Stock Markets

World shares steadied and the dollar resumed its rise on Friday after a wobble caused by U.S. President Donald Trump’s decision to cancel a summit with North Korea, though political risk put Italian markets on track for heavy weekly losses. 

Markets were soothed somewhat by the Pyongyang’s measured response to Trump’s announcement, with Vice Foreign Minister Kim Kye Gwan expressing hope for a “Trump formula” to resolve the standoff over its nuclear programme

North Korea tensions aside, markets’ appetite for risk was kept in check by concern over Italy’s president opposing the incoming coalition government’s plan to appoint a politically inexperienced eurosceptic as economy minister.

MSCI’s all-country equity index .MNIWD00000PUS was flat after three days of losses which put it on track for its second straight week in the red, while non-Japanese Asian equities .MIAPJ0000PUS also eked out 0.1 percent gains.

The Seoul index .KS11 pared falls of almost one percent to trade down 0.2 percent and the Korean won also firmed 0.3 percent to the dollar KRW=.

But despite Thursday’s Wall Street declines, there were no immediate signs of a broad sell-off with Wall Street’s volatility index .VIX ending at a four-month low.

She cited the example of Turkey and Italy where a stock and bond sell-off has not spilled much into other emerging economies or peripheral euro zone states such as Spain or Portugal.

European shares opened firmer .FTMIB but looked set for their first weekly drop since March, pressured by the Italy worries and signs the euro bloc's economic recovery continues to run out of steam.

Italian stocks, which saw record outflows in the past week, fell 0.3 percent and were set for their third straight week of losses .FTMIB

European carmakers’ shares .SXAP which fell heavily after Trump mooted possible tariff increases on imported cars, bounced after the comments drew criticism from U.S. business groups and members of his own party.

However, worry about Italy kept the euro under pressure. It fell 0.15 percent against the dollar, putting it on track for the sixth straight week of losses EUR=EBS, while the Swiss franc, traditionally seen as a safe-haven, is set for a fourth consecutive weekly gain against the single currency EURCHF=.

Also on the upside, the dollar rebounded 0.25 percent after touching two-week lows versus a basket of currencies .DXY on Thursday. However, it held under this week’s five-month highs.

The yen, another currency deemed to be a safe-haven asset, slipped 0.2 percent against the dollar, reversing gains seen after the summit cancellation. JPY=D3

The spread on 10-year respective bonds widened on Friday to 200 basis points (bps), having widened 30 bps this week. IT10YT=RR DE10YT=RR

German 10-year fell about 2 bps, tracking U.S. Treasuries where yields touched near two-week lows on Thursday.

For Europe, another potential headache are signs its growth recovery is running out of steam. Some relief on this front was provided by Germany’s Ifo business confidence index which held steady this month after falling for five straight months.

However, this week’s PMI business surveys indicated growth was slowing, with expansion at a 20-month low in Germany. UK data meanwhile confirmed first quarter growth at a lacklustre 0.1 percent.

With U.S. capital goods orders data due later in the day, Treasury yields stayed well off this month’s seven-year highs. US10YT=RR

Worries that investors could shift assets from emerging markets to higher-yielding U.S. bonds have been a major headwind for emerging markets this year.

Among them, Turkey has been the worst hit over concerns about the central bank’s ability to tame double-digit inflation because of political pressure from President Tayyip Erdogan, a self-described “enemy of interest rates”.

The Turkish lira has given up most of the gains made after the central bank’s emergency 300 bps rate rise on Wednesday and stood at flat against the dollar. It has fallen almost 15 percent this month.

Stocks Rebound as Korea Concerns Cool; Oil Falls

European Stock Markets

The Stoxx Europe 600 Index advanced, with most sectors in the green, and equity-index futures pointed to a higher U.S. open as concerns about an escalation in tensions over North Korea’s nuclear program eased. 

WTI crude slumped below $70 a barrel after a Saudi minister said supply would likely be boosted in the second half. Italy’s bonds dropped as worries mounted over its leadership, sending the spread between German and Italian 10-year yields above 2 percentage points. 

Earlier, stocks in Asia saw modest declines.

Investors are are taking a more sanguine view on geopolitical risks, after stocks declined from the U.S. to Asia as President Donald Trump blamed the “tremendous anger and open hostility” from Pyongyang for his decision to scrap his planned meeting with Kim Jong Un. While North Korea’s apparent willingness to keep talking appeared to soothe markets, other risks remain. 

Spain’s biggest opposition party is ready to push for a no-confidence motion against Prime Minister Mariano Rajoy, while tensions around global trade linger.

Elsewhere, Turkey’s lira swung between gains and losses, though still heading for its worst week since in eight years, after the central bank said it would allow exporters to repay dollar-denominated loans in the local currency, while the pound weakened after the European Union dismissed many of the U.K.’s plans for their post-Brexit relationship.


The Stoxx Europe 600 Index rose 0.5 percent as of 11:10 a.m. London time.
Futures on the S&P 500 Index rose 0.2 percent.
The U.K.’s FTSE 100 Index gained 0.2 percent.
Germany’s DAX Index increased 1.1 percent.
The MSCI Emerging Market Index rose 0.3 percent.
The MSCI Asia Pacific Index fell 0.1 percent.

Asian shares defensive but North Korea's stance soothes nerves

Asian Stock Markets

Market sentiment was a little shaky on Friday with Asian shares on the defensive after U.S. President Donald Trump scrapped a key summit with North Korea, though investors’ fears were calmed by Pyongyang’s measured response to the cancellation. 

North Korean Vice Foreign Minister Kim Kye Gwan said Pyongyang still hoped for a “Trump formula” to resolve the standoff over its nuclear weapons programme, noting that North Korea was open to resolving issues with the United States.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was almost flat, while South Korea's Kospi .KS11 pared much of its earlier loss of 0.9 percent. Japan's Nikkei .N225 was up 0.1 percent.

On Wall Street the S&P 500 .SPX ended 0.2 percent lower on Thursday, though it clawed back a large part of its earlier loss of 0.95 percent.

Even before the reaction from Pyongyang, there were no immediate signs of widespread investor panic with Wall Street’s volatility index .VIX, seen as a gauge of investors’ fears, ending at a four-month low on Thursday.

Analysts said that level of calm reflected investors becoming accustomed to Trump’s dramatic negotiation style, in which he makes drastic calls before making compromises, and are increasingly seeing his North Korea’s Kim Jong Un adopt a similar approach.

“I suspect they couldn’t agree on denuclearisation. But looking at comments from the both sides, none of them is ruling out holding a meeting in the future. So I do not expect to see an immediate escalation in military tension,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

Adding to political jitters was Trump’s raising the spectre of high U.S. tariffs on imported cars, reigniting fears of a trade war, although some investors see this as a Trump tactic to get better deals from big car-exporting countries.

The 10-year U.S. Treasuries yield US10YT=RR dipped to as low as 2.955 percent on Thursday as bond prices rose before it ticked back to 2.992 percent in Asia on Friday. It is still off a seven-year high of 3.128 percent hit a week ago.

“For many Asian markets, rises in U.S. bond yields would have been a bigger problem (than cancellation of the meeting between Trump and Kim),” said Yukino Yamada, senior strategist at Daiwa Securities.

Worries that investors could shift assets from emerging markets to higher-yielding U.S. bonds have been a major headwind for emerging markets.

The yen slipped in Asia after hitting a two-week high against the dollar on Thursday in a reflex flight-to-safety reaction to Trump’s manoeuvres.

The dollar traded at 109.60 yen JPY=, up 0.3 percent for the day. But it was still off Monday's four-month high of 111.395 yen and looks set to post its first weekly loss in nine weeks.

The yen is seen as a safe haven because of Japan’s status as the world’s largest net creditor nation.

The dollar extended its losses against the Swiss franc to hit 0.9886 franc overnight, its lowest level since April, before steadying at 0.9921 CHF=.

The euro traded at $1.1712 EUR=, slightly above its six-month low of $1.1676 touched on Wednesday, on course to mark its sixth consecutive declining week.

he currency was dogged by worries of a new coalition government in Italy to be formed by two anti-establishment parties, as well as mounting signs of an economic slowdown in the euro zone.Among emerging market currencies, the Turkish lira tumbled again, giving up a large chunk of the gains it made after the central bank raised interest rates by 300 points on Wednesday.

The lira has been hit by concerns about the central bank’s ability to tame double-digit inflation, particularly after President Tayyip Erdogan — a self-described “enemy of interest rates” — said he expected to assert more policy control after June 24 elections.

The lira TRYTOM=D3 fell 1.5 percent in Asia on Friday.

Oil prices slipped, partly on speculation reduced supplies from Venezuela and Iran could prompt the Organization of the Petroleum Exporting Countries (OPEC) to wind down output cuts in place since the start of 2017.

Russia hinted it may gradually increase output, after having withheld supplies in concert with the OPEC producer cartel since 2017.

OPEC may decide in June to lift output to make up for reduced supply from crisis-hit Venezuela and Iran, which was stung by the U.S. decision to withdraw from a multilateral nuclear arms control deal, OPEC and oil industry sources told Reuters.

Brent crude LCOc1 futures stood at $78.68 a barrel, down 0.15 percent on Friday after a 1.27 percent loss the previous day. U.S. West Texas Intermediate (WTI) crude CLc1 futures were little changed at $70.66 per barrel. They lost 1.57 percent on Thursday.

Global stocks Mixed as Trade Worries Linger; Euro Gains

Global Stock Markets

European stocks climbed and U.S. futures were steady as a dose of calm returned to markets on Thursday, though concerns surrounding global trade were not far away. The yield on 10-year Treasuries edged back above 3 percent, while the euro and pound gained.

The Stoxx Europe 600 Index managed to claw back a little ground following Wednesday’s selloff, even as carmakers took a hit after President Donald Trump ordered a probe into automobile imports to the world’s biggest economy. That news also dragged the MSCI Asia Pacific Index lower. Major American equity benchmarks were poised to open little changed.

Sterling rallied thanks to an April retail sales beat, while the lira resumed its slump as traders weighed whether an emergency rate hike was enough to stem losses. Safe-haven assets including gold and Japan’s yen climbed. Oil slipped.

It’s been a torrid week across markets so far, with investors forced to navigate escalating geopolitical and trade risks, from Trump’s decision to back away from an agreement with China to North Korea warning of a “nuclear-to-nuclear showdown.” Questions are swirling around the Italian populist government’s economic policies, while Brexit negotiations loom large over British assets. Amid the noise, the impact of somewhat dovish minutes from the Federal Reserve appeared to fade.

Meanwhile, emerging-market currencies rose despite the lira move, and developing-nation stocks also advanced. The euro strengthened after falling to a six-month low as traders await the latest minutes from the ECB.

Stocks
The Stoxx Europe 600 Index climbed 0.3 percent as of 10:51 a.m. London time.
Futures on the S&P 500 Index increased less than 0.05 percent.
The U.K.’s FTSE 100 Index declined 0.1 percent.
Germany’s DAX Index advanced 0.1 percent.
The MSCI Emerging Market Index jumped 0.5 percent.
The MSCI Asia Pacific Index decreased 0.2 percent to the lowest in more than two weeks.

Currencies
The euro gained 0.3 percent to $1.173, the biggest climb in two weeks.
The British pound climbed 0.3 percent to $1.3392, the largest climb in more than five weeks.
The Japanese yen advanced 0.3 percent to 109.73 per dollar, the strongest in more than a week.
The Turkish lira decreased 2.4 percent to 4.6865 per dollar, the weakest on record.

Bonds
The yield on 10-year Treasuries advanced one basis point to 3.01 percent, the biggest gain in a week.
Germany’s 10-year yield gained one basis point to 0.52 percent.
Britain’s 10-year yield increased one basis point to 1.448 percent.
Italy’s 10-year yield decreased six basis points to 2.344 percent.

Commodities
West Texas Intermediate crude declined 0.7 percent to $71.32 a barrel, the lowest in more than a week on the biggest drop in almost two weeks.
Gold increased 0.2 percent to $1,296.34 an ounce, the highest in more than a week on the largest climb in two weeks.
Brent crude sank 1 percent to $79.00 a barrel, the biggest tumble in more than two weeks.

Asia share markets hit by U.S. auto tariff threat, dollar pulls back

Asian Stock Markets

Asian shares fell on Thursday after the U.S. government launched a national security probe into auto imports that could lead to new tariffs, and President Donald Trump’s comments indicated fresh setbacks in U.S.-China trade talks. 

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was 0.1 percent higher, but Japan's Nikkei stock index .N225 fell 1.2 percent as auto shares slumped. South Korea's KOSPI lost 0.3 percent.

A broad MSCI index of automobile and auto components firms .MIWO0AC00PUS was down 0.9 percent. Tokyo’s SE TOPIX transportation equipment index .ITEQP.T was 2.6 percent lower.

The U.S. Commerce Department said on Wednesday that it would launch a national security investigation into car and truck imports under Section 232 of the Trade Expansion Act of 1962, a move that could lead to tariffs like those imposed on steel and aluminium in March.

Adding to market jitters, Trump on Wednesday called for “a different structure” in any trade deal with China, fuelling uncertainty over the negotiations.

On Thursday, China’s Commerce Ministry said it had not pledged to cut China’s trade surplus with the U.S. by a certain figure, and that it hopes the U.S. implements measures promised during trade negotiations as soon as possible.

China's blue chip CSI 300 index .CSI300 was 0.1 percent lower.

Prompting further uncertainty, Trump on Wednesday cast doubt on plans for an unprecedented summit with North Korean leader Kim Jong Un, saying he would know next week whether the meeting would take place.

While the minutes from the Federal Reserve’s May 1-2 meeting indicated that policymakers expect another interest rate increase would be warranted “soon” if the U.S. economic outlook remains intact, they helped to ease market concerns that the Fed would accelerate the pace of interest rate increases.

The two-year Treasury note yield US2YT=RR, which rises with traders’ expectations of higher Fed fund rates, was at 2.5121 percent after touching 2.5970 on Wednesday.

The yield on benchmark 10-year Treasury notes US10YT=RR fell back below the 3-percent threshold to 2.9825 percent, compared with its U.S. close of 3.003 percent on Wednesday.

Analysts said that market uncertainty was prompting a clear flight to safety across financial markets.

The dollar was down 0.6 percent against the yen to 109.44 JPY=.

The euro EUR= was up 0.1 percent on the day at $1.1709. The dollar index .DXY, which tracks the greenback against a basket of six major rivals, was 0.2 percent lower at 93.839.

Concerns over trade, talks and tariffs overpowered indications of strong economic performance in two of the region’s major economies.

Confidence among Japanese manufacturers saw its first rise in fourth months, and service-sector sentiment rose to a record high in the latest Reuters Tankan poll, underscoring expectations that the Japanese economy will return to growth in the second quarter.

In South Korea, Finance Minister Kim Dong-yeon said the economy is on track for annual growth of 3 percent despite concerning indicators such as high youth unemployment.

The Bank of Korea held interest rates steady for a sixth straight month on Thursday, with inflation seen remaining below target and amid concerns a U.S.-China trade war would hurt regional economies.

In commodities markets, U.S. crude CLc1 was down 0.2 percent at $71.68 a barrel. Oil prices fell on Wednesday after an unexpected rise in U.S. crude and gasoline inventories.

Brent LCOc1 futures were 0.3 percent lower at $79.53 a barrel, continuing to move lower after rising above $80 for the first time since November 2014 last week.

The most-traded iron ore futures on the Dalian Commodity Exchange DCIOcv1 rose for the first time in six sessions on Thursday, gaining 0.3 percent.

Weak commodity prices continued to put pressure on Australian shares , which were 0.2 percent lower, extending losses into a sixth consecutive session. New Zealand's benchmark S&P/NZX 50 index .NZ50 was 0.7 percent higher.

Gold was slightly higher. Spot gold XAU= was traded at $1,294.11 per ounce.

Trade and growth fears spurs dash for safe havens

Global Stock Markets

Investors sold equities on Wednesday and raced to buy yen and government bonds from the United States and Germany on fears that setbacks to U.S-China trade talks would undermine increasingly fragile-looking world growth. 

The yen JPY=D3 rose 1 percent against the dollar, U.S. bond yields US10YT=RR fell to eight-day lows and world shares .MIWD00000PUS slipped half a percent from one-week highs as weak euro zone data added to negative sentiment after U.S. President Donald Trump's comments on the crucial trade talks.

Investors were also watching Turkey and Italy, with the former seemingly headed for a full-blown crisis as the currency plunged to new record lows. Italian borrowing costs resumed their rise back towards recent multi-month highs on fears an incoming coalition will sharply boost government spending.

The risk-off mood was initially triggered by Trump saying he was not pleased with progress on trade talks with China.

The comments tempered earlier optimism that China and the United States would be able to avert a damaging global trade war. U.S. Treasury Secretary Steven Mnuchin had said earlier the “trade war” was “on hold”.

Trump also floated plans to fine China’s ZTE Corp (000063.SZ) (0763.HK) and cast doubt on a planned June 12 summit with North Korean leader Kim Jong-Un.

Those developments drove Wall Street to a weaker close on Tuesday and filtered into Asia where MSCI's ex-Japan equity benchmark .MIAPJ0000PUS fell 0.3 percent. Japan's Nikkei .N225 lost 1.2 percent to reach 1-1/2-week lows.

The pan-European stock index meanwhile fell 0.8 percent while futures signalled a sharply weaker open for New York markets ESc1.

Such worries were underscored by flash Purchasing Managers’ Index (PMI) data which showed on Wednesday that the euro zone economy was slowing more sharply than previously expected.

The data, along with the global sentiment setbacks, sent euro zone bond yields broadly lower, while U.S. Treasury yields slipped to an eight-day low after retreating sharply on Tuesday from near seven-year highs.

“Italy’s political impasse continues, French and German PMIs were soft and global risk sentiment has taken another knock,” Societe Generale analysts said.

Savary was more sanguine on the data, noting that growth, while slowing, remained healthy. But he warned that trade setbacks alongside geopolitics, especially the reimposition of Iran sanctions, could have economic consequences via potentially higher inflation.

Oil prices held near 3-1/2-year highs on concerns over supply from Venezuela and Iran. But Brent LCOc1 futures slipped 0.5 percent, coming off the $80 per barrel milestone.

Lower U.S. yields sapped some of the appetite for the dollar, taking it almost 1 percent lower against the yen JPY=D3. Against a basket of currencies, however, it rose 0.3 percent, with the euro EUR=EBS hitting a new six-month low against the greenback.

The single currency also fell against another “safe” asset, the Swiss franc EURCHF=D3, touching a two-month low.

Italian bonds fell in value, reversing the modest gains seen on Tuesday after six days of selling that took 10-year yields IT10YT=RR to their highest in 14 months.

Italian stocks tumbled 1.8 percent .FTMIB and are so far suffering their worst month since mid-2016. Investors are watching to see if the eurosceptic Paolo Savona would be appointed to the key economy minister position.

Turkish bond yields have jumped almost to 15 percent, more than 250 bps higher since end-April, with an emergency interest rate rise looking all but certain.

Asian shares under pressure with Trump tempering Sino-U.S. trade optimism

Asian Stock Markets

Asian shares were mostly weak on Wednesday with investors cautious after U.S. President Donald Trump tempered optimism over progress made so far in trade talks between the world’s two largest economic powers. 

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.2 percent, while Japan's Nikkei .N225 lost as much as 1.4 percent to hit a 1-1/2-week low and the Shanghai Composite Index .SSEC retreated 0.6 percent.

On Wall Street, the S&P 500 .SPX shed 0.31 percent overnight, losing steam after hitting a two-month high.

Trump said on Tuesday he was not pleased with recent trade talks between the United States and China, souring the improved market sentiment following weekend comments from U.S. Treasury Secretary Steven Mnuchin that the “trade war” is “on hold”.

His remarks followed Beijing’s announcement that it would cut import tariffs for automobiles and car parts.

Trump also floated a plan to fine ZTE Corp (000063.SZ), (0763.HK) and shake up its management as his administration considered rolling back more severe penalties.

Further weighing on prices of risk assets, Trump also said there was a “substantial chance” his summit with North Korean leader Kim Jong Un will not take place as planned on June 12 amid concerns that Kim is resistant to giving up his nuclear weapons.

Investors fret Abe’s long-running cronyism scandal could attract more attention as the Ministry of Finance is due to release related documents on Thursday.

The cautious mood helped to underpin bonds. The 10-year U.S. Treasuries yield US10YT=RR stood at 3.054 percent, off Monday’s near seven-year high of 3.128 percent.

As lower U.S. yields sap the appetite for the dollar, the euro traded at $1.1754 EUR=, hovering above Monday's five-month low of $1.1717.

Against the yen the dollar slipped 0.4 percent to 110.47 JPY= from Monday's four-month high of 111.395.

The biggest mover in the currency market was the Turkish lira TRYTOM=D3, which fell more than two percent early on Wednesday to a record low of 4.8450 after rating agencies sounded the alarm on Tuesday over plans by President Tayyip Erdogan to tighten his grip on monetary policy.

The lira has fallen almost 15 percent so far this month.

In commodities, oil prices held firm near 3-1/2-year highs on potential supply concerns surrounding Venezuela and Iran.

U.S. West Texas Intermediate (WTI) crude CLc1 futures traded little changed at $72.01 a barrel, a 0.26 percent loss. They touched $72.83 a barrel, the highest since November 2014, on Tuesday.

Brent LCOc1 futures stood at $79.23 a barrel. Last week, the global benchmark topped $80 for the first time since November 2014.

Bitcoin BTC=BTSP dropped below $8,000 to five-week lows, entering a downtrend channel on technical charts. The cryptocurrency last traded at $7903.61, down 1.0 percent on the day.

Global stocks and currencies rebound with risk appetite creeping back

Global Stock Markets

A degree of risk appetite returned to global markets on Tuesday, with developing-nation stocks and currencies rebounding and the euro climbing with Italian bonds. The dollar fell as Treasury yields climbed, and the pound advanced.

U.S. equity futures pointed to a higher open and the Stoxx Europe 600 Index nudged upward after the MSCI Asia Pacific gauge eked out a gain in a mixed session earlier. Emerging stocks were the stand out, ending a three-day losing streak.

The euro swung from a loss to a gain as investors weigh the chances Italy’s president will seek to curtail a potential populist government, while the country’s bonds rebounded from a two-day slide. The Turkish lira fell to yet another record low. Sterling strengthened amid speculation there could be another U.K. election and after upbeat comments from a Bank of England policymaker.

Easing trade tension between the world’s two biggest economies -- China confirmed a cut to the import duty on passenger cars on Tuesday -- has helped restore some confidence in emerging-market assets, though Italy’s political situation continues to loom over global markets. President Sergio Mattarella is reportedly preparing to pick a premier on Wednesday or Thursday. Beyond politics, central banks are in focus this week -- the Federal Reserve will release minutes of its latest policy meeting on Wednesday, while the ECB follows suit on Thursday. A raft of U.S. debt sales adds to the busy agenda.

Elsewhere, the South African rand and Russian ruble headed higher. Hong Kong and South Korean markets were shut for a holiday. Most commodities, including oil, advanced as the greenback weakened.

Stocks

The Stoxx Europe 600 Index rose 0.1 percent as of 12:17 p.m. London time.
Futures on the S&P 500 Index rose 0.2 percent.
The U.K.’s FTSE 100 Index rose 0.2 percent.
Germany’s DAX Index rose 0.4 percent.
The MSCI Emerging Market Index gained 0.5 percent, the largest rise in more than a week.
The MSCI Asia Pacific Index climbed 0.1 percent.

Currencies
The euro increased 0.2 percent to $1.1809, the strongest in a week.
The British pound gained 0.2 percent to $1.3452.
The Japanese yen increased 0.1 percent to 110.98 per
The Turkish lira sank 0.8 percent to 4.6112 per dollar, the weakest on record.

Bonds
The yield on 10-year Treasuries climbed two basis points to 3.08 percent.
Germany’s 10-year yield gained four basis points to 0.56 percent.
Britain’s 10-year yield gained four basis points to 1.518 percent.
Italy’s 10-year yield sank nine basis points to 2.298 percent, the largest tumble in almost seven months.

Commodities
West Texas Intermediate crude increased 0.2 percent to $72.42 a barrel, the highest in more than three years.
Gold rose 0.1 percent to $1,294.36 an ounce.

Asian shares skid as dollar becomes strong and oil surges

Asian stock Markets

Asian shares skidded on Tuesday as a strong dollar sapped demand for emerging market assets while surging oil prices stoked concerns about a flare-up in inflation and faster U.S. interest rate increases. 

Japan’s Nikkei ended 0.2 percent lower and Australian shares fell 0.7 percent. Chinese stocks were in the red too with the blue-chip CSI300 off 0.5 percent.

Liquidity was relatively thin due to holidays in South Korea and Hong Kong.

Even though most major Asian markets edged lower, MSCI’s broadest index of Asia-Pacific shares outside Japan managed to eke out a small 0.17 percent gain.

The index is well below an all-time peak of 617.12 points hit in January, and is flat so far this year after a super-charged 33.5 percent gain in 2017.

Those concerns offset the boost to sentiment from overnight gains on Wall Street over the apparent reconciliation between the United States and China over import duties.

Analysts said investors in the region were worried about the growth outlook, with the U.S. Federal Reserve staying on its policy tightening path.


JPMorgan’s Shigemi said investors will now turn their focus to the next Fed meeting on June 13 where it is widely expected to raise rates for a second time this year.

A total of three hikes is almost fully priced-in by the market for 2018 although some investors expect the Fed to be more aggressive.

It was the fear of higher inflation and thus faster Fed rate rises that caused a bond market rout earlier this year, sending yields sharply higher and triggering a share market sell-off.

The dollar hovered near five-month highs against a basket of currencies, boosted by the U.S.-China trade optimism.

The dollar index was last down 0.1 percent at 93.56 from Monday’s top of 94.058.


The Japanese yen steadied near four-month lows at 111.05 per dollar, while sterling eased 0.1 percent to $1.3416 as investors prepared for key data that could determine whether the Bank of England raises rates in 2018.

Elsewhere, oil prices soared to their highest since 2014 after Venezuela’s presidential election heightened worries that the country’s oil output could fall further.

The market is also weighing the possibility of additional U.S. sanctions on the country.

U.S. crude added 26 to $72.50 per barrel and Brent rose 19 cents to $79.40.

The combination of higher oil and conciliatory actions on the US-China trade front boosted the Australian dollar, a liquid proxy for risk, to a one-month peak.

As the dollar strengthened, gold prices eased to stay near the lowest since late December at $1,289.68.

Asian stocks steadies amid caution over U.S.-China trade talks

Asian Stock Markets

Asian stocks were steady on Friday amid caution over developments in U.S.-China trade negotiations, while the dollar perched near a five-month peak after the benchmark U.S. Treasury yield hit its highest in seven years. 

Spreadbetters expected European stocks to open mixed, with Britain’s FTSE dipping 0.1 percent, Germany’s DAX rising 0.13 percent and France’s CAC little changed.

MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed. The index was headed for a 1 percent loss this week.

Hong Kong’s Hang Seng rose 0.17 percent and Shanghai climbed 0.3 percent as some investors bet Beijing and Washington will reach a deal in the latest round of trade talks. [.SS]

Japan’s Nikkei rose 0.35 percent, South Korea’s KOSPI was up 0.3 percent and Australian stocks dipped 0.2 percent.

Wall Street ended slightly lower on Thursday as investors grappled with U.S.-China trade tensions after U.S. President Donald Trump said that China “has become very spoiled on trade”.

But helping ease some of the tension, Beijing has offered Trump a package of proposed purchases of American goods and other measures aimed at reducing the U.S. trade deficit with China by some $200 billion a year, U.S. officials familiar with the proposal said.

A second round of talks between senior Trump administration officials and their Chinese counterparts started on Thursday, focused on cutting China’s U.S. trade surplus and improving intellectual property protections.



In currencies, the dollar index against a basket of six major currencies was steady at 93.471 after rising to a five-month peak of 93.632 on Thursday.

The index has gained about 1 percent this week, buoyed by the surge in U.S. Treasury yields, with the 10-year U.S. Treasury note yield hitting a seven-year peak of 3.128 percent.

The euro was up 0.1 percent at $1.1805, but not far off a five-month trough of $1.1763 brushed on Wednesday. The currency has fallen nearly 1.2 percent this week, largely pressured by Italian political uncertainty.

Reports this week that Italian populist parties likely to form the country’s next government may ask the European Central Bank for debt forgiveness have raised concerns about Italy abandoning fiscal discipline.

The dollar extended an overnight rally and rose to 111.005 yen, its highest since late January. The greenback has gained about 1.4 percent against its Japanese peer this week.

Emerging market currencies have also lost ground against the dollar this week as the rise in U.S. yields showed little signs of slowing.

The Turkish lira fell to a record low against the dollar this week, the Brazilian real plumbed a two-year low while Mexico’s peso has shed more than 5 percent this month.

A retreat by Indonesia’s rupiah to a 2-1/2-year low prompted the central bank to tighten monetary policy on Thursday for the first time since 2014 to support the currency.

In commodities, Brent crude oil futures were 16 cents higher at $79.46 a barrel after rising to $80.50 on Thursday, their highest since November 2014.

Brent has risen 3 percent this week and is headed for a sixth week of gains.

A rapid slide in oil supply from Venezuela, concern that U.S. sanctions will disrupt exports from Iran, and falling global inventories have all combined to push oil prices up nearly 20 percent in 2018. [O/R]

Inflation concerns, strong U.S. economic indicators and worries over increasing debt supply have pushed Treasury yields higher this week.

Warning Signal for Global Stock Markets Flashing in Japan - Morgan Stanley

Asian Stock Markets

Morgan Stanley calls it “the end of easy,” that witching hour in global stock markets when economic growth is slowing, the Federal Reserve is tightening, and inflation is ticking up. After a long bull run, strategists the world over are getting nervous -- and watching for the top.

And over in Tokyo, a warning is starting to flash.

A feared rotation is taking hold, as investors dump the shares that propelled the good times, such as industrials and technology companies, in favor of an entirely different class of firms: those needed no matter how bad the economy gets. When investors become less optimistic about the future, the theory goes, that’s where they turn.

Yoshinori Shigemi, a global market strategist at JPMorgan Asset Management Japan Ltd., has been to this rodeo before. And he’s alert to the danger.

Utilities, health-care, consumer staples and real estate stocks -- all so-called defensive shares -- are the top performers of the 11 industry groups in the MSCI Japan Index this year, beating information technology and industrial companies, so-called cyclical shares seen as benefiting the most from economic expansion.

It’s a change that hasn’t happened in the U.S. and Europe, where cyclicals are still mostly in the ascendancy as defensives generally lag behind. But Shigemi of JPMorgan Asset has a theory about that. Essentially, he says, Japan’s market can respond more to U.S. developments than the U.S. itself.

The MSCI Japan Utilities Index has jumped 15 percent this year, the best performance among the industry groups, as the broader Japan gauge retreated. Last year, when the MSCI Japan surged 18 percent, utilities were the only group to decline, tumbling 5.6 percent.

Concerns that the global economy may peak, uncertainties over President Donald Trump’s policies and the yen’s appreciation against the dollar earlier this year have contributed to the rally in Japanese defensives, according to Hiroshi Matsumoto, head of Japan investment at Pictet Asset Management Ltd.

For Mitsushige Akino, it’s all about U.S. Treasuries. Yields on U.S. 10-year notes rose past 3.1 percent on Wednesday to the highest level in about seven years, helping fuel bets the Fed may need to raise interest rates three more times in 2018.

Japanese defensive shares have been harbingers of global equity downturns before. Most notably, they started to outperform cyclicals in 2007, not long before the global financial crisis sent equities tumbling. An index of global shares sank 44 percent the following year.

But the link doesn’t always apply. Defensives also started outperforming in early 2014, just before Japan raised its consumption tax. And that time, global equities continued to advance.

What will happen this time is hard to tell, but two questions are worth asking. Is Japan’s shift to defensives preceding a similar trend in other markets? And does it mean the bull run is set to end?

Morgan Stanley strategists including Michael Wilson are certainly monitoring for such a turning point. The research team isn’t convinced the market is ready to move into full defensive mode just yet, they wrote in a report dated May 13. But it does “bear close watching,” they wrote.

Asian shares climb higher after hitting five-month lows a day earlier

Asian Stock Markets

Asian shares edged higher on Thursday while the euro gained some respite after hitting five-month lows a day earlier.

The common currency slumped on Wednesday following a report that Italian populist parties trying to form a coalition government could ask the European Central Bank to forgive 250 billion euros of Italian debt.

In equity markets, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.1 percent, while Japan’s Nikkei gained 0.7 percent.

The gains in Asian shares came after U.S. equities advanced on Wednesday, led by retail and technology shares, even as a rise in U.S. 10-year Treasury yields to an almost seven-year high suggested more competition for equities.

The United States and China start trade talks on Thursday intended to avert a damaging tariff war, with the White House’s harshest China critic relegated to a supporting role, senior Trump administration officials said on Wednesday.

Shares of Chinese tech giant Tencent Holdings Ltd rose 5.2 percent in Hong Kong, having opened the day up 7 percent after it reported first-quarter results on Wednesday that were better than expected.
In currency markets, the euro rose 0.2 percent to $1.1825 , regaining some composure after having set a five-month low of $1.1763 on Wednesday.

Worries about political risks jolted Italian markets and pressured the euro following reports that Italy’s anti-establishment 5-Star Movement and anti-immigrant League may ask the European Central Bank to forgive 250 billion euros of debt as the parties worked to draft a coalition programme.

That was enough to spook Italian markets, even though the League’s economic spokesman told Reuters that debt cancellation was never in an official draft of a government programme. .

The two populist parties have been holding talks aimed at forming a coalition government and ending 10 weeks of stalemate following an inconclusive election on March 4.

Yields on 10-year U.S. Treasuries hit 3.10 percent on Wednesday for the first time since July 2011, continuing to weigh on stocks as investors considered whether U.S. government bonds might be more attractive than riskier equities.

The U.S. 10-year Treasury yield set a fresh seven-year high of 3.108 percent in Asian trade on Thursday. It last stood near 3.104 percent.

The rises in U.S. bond yields have helped buoy the dollar, which has gained 1.5 percent against a basket of six major currencies so far in May.

U.S. bond yields have risen after data this week showed a solid rise in U.S. retail sales, suggesting the U.S. economy is on a stronger footing in the second quarter.

Nikkei falls as US yield spikes, MUFG tumbles after earnings

Asian Stock Markets

Japanese stocks edged lower on Wednesday as sentiment was knocked by a surge in U.S. Treasury yields to seven-year highs and after Pyongyang called off talks with Seoul, throwing a major U.S.-North Korean summit into question.

Nisshin Steel Co jumped 16 per cent after Nippon Steel & Sumitomo Metal Corp said in the afternoon that Nisshin will become its wholly owned subsidiary next January via a share exchange.

The Nikkei ended 0.4 per cent lower to 22,717.23.

Data in the morning showing the world's third-biggest economy suffered a deeper-than-expected contraction in the first-quarter also checked buyers.

Japan's economy contracted a more than expected 0.6 per cent in the January-March period on an annualised basis, putting an end to eight straight quarters of expansion.

In the U.S. market overnight, the yield on 10-year U.S. Treasury notes jumped to its highest level since July 2011, driven by upbeat consumer spending and factory data.

That has raised doubts about the planned summit between U.S. President Donald Trump and his North Korean counterpart leader Kim Jong Un scheduled next month

Wednesday's big losers included Mitsubishi UFJ Financial Group, which fell 2.4 per cent after the bank's annual net profit missed analyst estimates and on disappointment over the size of a share buyback plan.sshin Steel Co jumped 16 per cent after Nippon Steel & Sumitomo Metal Corp said in the afternoon that Nisshin will become its wholly owned subsidiary next January via a share exchange.

Asian shares slides as North Korea suspends talks, U.S. yields climb

Asian Stock Markets

Asian stock markets dipped on Wednesday after Pyongyang abruptly called off talks with Seoul, throwing a U.S.-North Korean summit into doubt, while surging bond yields revived worries about faster U.S. interest rate hikes that could curb global demand. 

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.2 percent as Pyongyang’s move appeared to mark a break in months of warming ties between North and South Korea and with Washington.

A cancellation of the June 12 summit in Singapore could see tensions on the Korean peninsula flare again even as investors worry about China-U.S. trade tensions and the sustainability of global economic growth.

Strong U.S. retail sales and factory data on Tuesday pushed the U.S. 10-year yield through a key level to hit 3.095 percent, its highest since July 2011, raising worries about higher borrowing costs for companies worldwide.

The 10-year yield US10Y=RR was last at 3.063 percent.

The rise in yields hurt U.S. share markets on concerns it would undercut stock valuations. [.N]

The Dow Jones Industrial Average .DJI fell 193.00 points, or 0.78 percent, to 24,706.41, the S&P 500 .SPX lost 18.68 points, or 0.68 percent, to 2,711.45 and the Nasdaq Composite .IXIC dropped 59.69 points, or 0.81 percent, to 7,351.63.

Elsewhere in Asia, Japan's Nikkei .N225 slid 0.4 percent, while South Korea's KOSPI .KS11 struggled for traction.

Stocks in China .SSEC dipped as traders awaited news from a second round of Sino-U.S. trade talks in Washington this week, with both sides believed to be still far apart. But Australian stocks bucked the trend and advanced 0.4 percent.

The yen largely shrugged off data that showed Japan’s economy shrank by 0.6 percent on an annualized basis in the January-March quarter, a sharper contraction than the median estimate of 0.2 percent and marking the end to eight straight quarters of expansion. 

High-yielding Asian currencies were particularly vulnerable to higher U.S. yields, which could prompt investors to shift funds out of emerging markets.

The Indonesian rupiah IDR= hit a 2-1/2-year lows while the Malaysian ringgit MYR= hit a four-month low.

The South Korean won KRW=KFTC was steadier but the country's bond yields KR10YT=RR rose to the highest level since late 2014.

In commodities markets, gold slightly rebounded after hitting a 4 1/2-month low the previous day on a strong dollar.

It stood at $1,294 per ounce XAU=, off Tuesday’s low of $1,289.30. [GOL/]

Asia stocks pulls back with soft chinese data

Asian stocks pulled back on Tuesday, brushing off a firmer lead from Wall Street, as investors turned cautious after soft Chinese economic data and awaited fresh developments on U.S.-China trade talks and North Korea.

Crude oil prices held near 3-1/2-year highs on supply concerns, while the dollar edged higher, underpinned by a rise in U.S. bond yields.

Spreadbetters expected European stocks to follow their Asian peers lower, with Britain's FTSE .FTSE, Germany's DAX .GDAXI and France's CAC .FCHI all seen shedding 0.2 percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.8 percent after rising the previous day to its highest since late March. The index had rallied for three straight sessions prior to Tuesday.

Japan's Nikkei .N225 dipped 0.1 percent, with its surge to a three-month peak bogging down.

The two countries are still “very far apart” on resolving trade frictions, U.S. Ambassador to China Terry Branstad said on Tuesday as a second round of high-level talks was set to begin in Washington.

Hong Kong's Hang Seng .HSI lost 0.9 percent, pulling back from a two-month peak to snap a five-day winning run, while Shanghai .SSEC slipped 0.2 percent.[.SS]

China reported weaker-than-expected investment and retail sales in April and a drop in home sales, clouding its economic outlook even as policymakers try to navigate debt risks and defuse a heated trade row with the United States.

The downbeat economic news temporarily offset optimism over further foreign inflows into Chinese stocks ahead of their inclusion in MSCI’s widely tracked equity benchmarks from June 1.

Investors in Chinese equities will likely have to re-jig their exposure after the U.S. index publisher made some last-minute tweaks in its index weightings on Tuesday. MSCI said 234 Chinese large caps will be included in its global and regional indexes next month.

Wall Street scraped out gains on Monday after weakness in defensive stocks offset optimism following U.S. President Donald Trump’s conciliatory remarks toward China’s ZTE Corp that helped calm U.S.-China trade tensions. [.N]

While higher oil prices sometimes raise inflation concerns, the recent crude oil surge - Brent has risen 17 percent so far in 2018 - was seen to be generally supportive for equities.

Brent crude LCOc1 added 6 cents to $78.29 a barrel, nearing a 3-1/2-year high marked on Monday. U.S. crude oil futures CLc1 advanced 2 cents to $70.98 and in reach of its highest level since November 2014 scaled on Thursday.

Oil prices received their latest lift as OPEC reported that the global oil glut has been virtually eliminated. Tensions in the Middle East and uncertainty about output from Iran amid renewed U.S. sanctions have contributed to the recent rise in oil prices. [O/R]

“The commitment of Saudi Arabia and the rest of OPEC to the production cuts is a major factor in supporting the price at the moment as well as the possibility of reduced exports from Iran due to sanctions,” said William O’Loughlin, investment analyst at Rivkin Securities.

In currencies, the dollar index against a basket of six major currencies gained 0.3 percent to 92.801 .DXY.

The greenback took a knock against the euro earlier on Monday after European Central Bank policymaker Francois Villeroy de Galhau said the ECB could give fresh timing guidance of its first rate hike as the end of its exceptional bond purchases approaches.

The U.S. currency managed to bounce back, however, after Cleveland Federal Reserve President Loretta Mester reiterated support for gradual interest rate increases.

The euro lost 0.1 percent to $1.1913 EUR= after pulling back sharply from the previous day's high of $1.1996.

The dollar was 0.25 percent higher at 109.920 yen JPY=, adding to the previous day's gains.

The currency drew support as U.S. Treasury yields rose amid the easing of U.S.-China trade tensions. [US/]

The 10-year Treasury note yield extended its overnight rise and brushed a 12-day high of 3.021 percent US10YT=RR.

Global Stocks set for strongest week since March

Global Stock Markets

Shares rose worldwide on Friday, getting a boost from soft U.S. inflation numbers that helped soothe worries of faster Fed monetary tightening and pushed the dollar to its lowest for a week.

The MSCI All Country World Index MIWD00000PUS, which tracks shares in 47 countries, was up nearly 0.4 percent and was set for its strongest week since March 9. The dollar .DXY fell 0.2 percent against a basket of currencies, erasing this week’s gains in the wake of inflation data released on Thursday.

Oil prices steadied near 3-1/2-year highs as the prospect of new U.S. sanctions on Iran tightened the outlook for Middle East supply at a time when global crude production is only just keeping pace with rising demand.

The inflation numbers followed employment data last week that pointed to sluggish wage growth.
While the rally in stocks seemed to point to investor relief, analysts were split over whether the slowdown in inflation could lower the chances of the Fed increasing the number of rate hikes it has suggested will take place this year.

Federal Reserve Bank of St. Louis’ President James Bullard will make a speech on Friday, as will European Central Bank President Mario Draghi.

ADS Securities head of research Konstantinos Anthis said the case for two or three further U.S. rate hikes might be decided after the summer. Fed funds futures show a 93-percent chance of one next month.


The inflation data also flattened the U.S. Treasury yield curve further, with the gap between 5-year and 30-year bonds at its narrowest since 2007. Investors also bought southern European government bonds, taking advantage of a rise in yields on the back of Italian political concerns.

Italian, Spanish and Portuguese 10-year borrowing costs fell 2-3 basis points (bps), outpacing better-rated peers at the end of a week in which the increasing likelihood of an anti-establishment coalition taking power in Italy had hurt the euro zone’s lower-rated debt.

Italian 10-year yields were set for their biggest weekly rise since February. IT10YT=RR ES10YT=RR PT10YT=RR

European stocks, meanwhile, were set to seal their longest winning streak for more than three years as M&A activity stole the spotlight from the tail-end of a robust earnings season.

The pan-European STOXX 600 was flat, but set for its seventh straight week of gains - its longest winning streak since March 2015. Germany's DAX .GDAXI was down 0.3 percent and Britain's FTSE 100 .FTSE was down 0.1 percent. Wall Street was futures indicated a positive start to the session. ESc1

Asian markets were cheered by a further easing in tensions on the Korean Peninsula, after U.S. President Donald Trump said he would meet North Korean leader Kim Jong Un in Singapore on June 12 for talks on Pyongyang’s nuclear weapons programme.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.7 percent to near three-week highs while Japan's Nikkei .N225 climbed 1.2 percent.

With the situation around North Korea off the boil for now, political concerns are focused elsewhere as the United States and China continue skirmishing over trade and as tensions rise in the Middle East.

U.S. and Chinese officials will meet in Washington for a second round of trade talks next week, after apparently making little progress in discussions in Beijing this month.

In currency markets, the pound traded at $1.3573, rising half a percent above a four-month low of $1.3457 touched on Thursday after the Bank of England held interest rates.

In commodities markets, spot gold rose 0.3 percent to $1,324.66 an ounce. XAU=

U.S. crude futures CLc1 were up 0.2 percent at $71.46 a barrel. Brent crude futures LCOc1 fell 0.1 percent to $77.41 a barrel.

Asian stocks rallies at three-week highs, gets boost from US inflation

Asian shares rallied on Friday as investors’ appetite for riskier assets got a boost from soft U.S. inflation, which helped alleviate worries of faster rate hikes by the Federal Reserve. 

Markets were also cheered by a further easing in tensions on the Korean Peninsula, after U.S. President Donald Trump said he would meet North Korean leader Kim Jong Un in Singapore on June 12 for talks on its nuclear weapons program.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.7 percent to near three-week highs with broad-based gains across all sectors. Japan’s Nikkei climbed 1.2 percent.

But spreadbetters indicated the upbeat mood was unlikely to last, with FTSE futures down a bit and E-Minis for the S&P500 a touch softer.

Most emerging Asian currencies were buoyant as the dollar eased after Thursday’s slower-than-expected April consumer price gain.

The soft figures followed payrolls numbers last week which pointed to sluggish wage growth.

The two data sets meant “inflation may be rising but not so rapidly that the Fed would have to take aggressive actions to keep the economy from overheating,” said James McGlew, analyst at Perth-based stock broker Argonaut.

A recent shakeout in global markets, partly stoked by Sino-U.S. trade tensions, has also eased, while money managers expect the relatively low global rates that have fueled a ‘Goldilocks’ boom in stock markets will remain in place for some time.

Indeed, a key measure of expected market swings, the Cboe Volatility Index, or VIX, has fallen very close to levels last seen in early January when stock markets were buoyant.

While North Korea has come off the boil for now, geopolitical concerns still remain as the U.S. and China continue skirmishing over trade and tensions rise in the Middle East.

U.S. and Chinese officials will meet in Washington for a second round of trade talks next week, after apparently making little progress in discussions in Beijing earlier this month.

Currency markets were largely muted during Asian trading.

The dollar index was up 0.2 percent after falling the most since late March on Thursday.

Investors trimmed their expectations for four Fed rate hikes after inflation data showed U.S. price pressures remained weak. The Fed has already raised rates once this year and is widely expected to go two more times in 2018.

The British pound inched above a four-month low of $1.3457 touched on Thursday after the BoE held key borrowing costs. It was last at $1.3505.

The recent slowing in price growth in major economies has boosted expectations that most central banks except the Fed will continue their massive bond-buying programs to keep policy stimulatory.

The euro was a tad lower at $1.1893. The Japanese yen gained mildly to be last at 109.29 per dollar.
Malaysian markets were closed Friday but its newly appointed Prime Minister Mahathir Mohamad emerged with key election pledges including repealing an unpopular goods and services tax and restoring a petrol subsidy.

Ratings agency Moody’s said some campaign promises would be “credit negative” for Malaysia. 
Such concerns pushed up the cost of insuring against a Malaysia default, with the country’s 5-year credit default swap price at its highest since early June 2017 at 95.090 basis points.

In commodities markets, spot gold slipped 0.1 percent to $1,319.33 an ounce.

Oil prices eased but stayed near multi-year peaks amid supply concerns after Trump withdrew from an Iranian nuclear deal and reinstated sanctions.

U.S. crude futures were last down 10 cents at $71.26 a barrel. Brent crude futures fell 18 cents to $77.29 a barrel, after hitting $78 earlier in the day, their highest since November 2014.