Nikkei hits 1-month low as cyclicals falter on growth worries

Asian Stock Markets

Japanese shares fell to one-month lows on Tuesday, with investors selling cyclical shares as concerns over European politics added to the list of reasons to be cautious about the global economic outlook.

The Nikkei average dropped 0.55 percent to 22,358, the lowest close in over a month and falling below its 100-day moving average, which came in at 22,308. The broader Topix fell 0.48 percent to 1,761, also a one-month low.

A sharp rise in Italian debt yields has added to worries about stability in Europe at a time when the region is losing economic momentum and global growth is under pressure from U.S. trade protectionism.

Economic cyclical shares led the decline, with securities brokerages falling 1.4 percent.

Steel companies and shippers — the sectors that have been pummelled most by worries about U.S. trade policies — led the losses, falling 1.3 percent and 0.9 percent, respectively.

Rising U.S. interest rates are likely to gradually squeeze borrowers. Market players think that is already becoming a reality for weak spots in emerging economies, such as Argentine and Turkey.

In addition, the yen has bounced back to around 109 per dollar from its four-month low of 111.395 touched last week, threatening the outlook for Japanese exporters.

Decliners outnumbered gainers by about 3-1.

Nippon Paper Industries tumbled 8.3 percent after it said on Monday it saw a net loss of 18 billion yen ($165.11 million) in the current financial year, due to impairment loss as paper demand continued to decline on digitalisation.

Among the Tokyo Stock Exchange’s 33 sector indexes, the paper and pulp company sub index was the worst performer, falling 2.3 percent.

Struggling display maker Japan Display fell 8.0 percent on worries about revenue losses after South Korea’s Electronic Times reported that Apple Inc had decided to use OLED screens for all new iPhone models for next year.

Tokai Carbon rose 9.2 percent, hitting record highs after it raised annual profit guidance by 47 percent.

The firm, which has benefitted from a rise in the prices of graphite electrodes, one of its main products, was among the best performers since last year. Its shares were the second-most active on the main board on Tuesday.

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.

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.

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.

Nikkei suffers biggest fall in two months with return of trade worries

Japan’s Nikkei share average suffered its biggest fall in two months on Wednesday, as comments from U.S. President Donald Trump rekindled worries about trade friction, hurting steelmakers and shippers among others.

The Nikkei tumbled 1.2 percent to 22,690, after sliding to 22,650 earlier, the weakest intraday level since May 11.

Trump on Tuesday said he was not pleased with recent trade talks between the United States and China, checking hopes that the world’s two biggest economies were on course to hammer out a deal.

U.S. Treasury Secretary Steven Mnuchin has earlier said that trade war is “on hold”, sending the

Nikkei over the psychologically important 23,000 level on Monday.

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

Shippers were under pressure, with Mitsui OSK Lines and Kawasaki Kisen dropping 2.8 percent and 2.9 percent, respectively.

Steelmakers fell 1.4 percent, with JFE Holdings shedding 3.5 percent.

The broader Topix skidded 0.7 percent to 1,797, with small shares outperforming large cap shares.

Topix Small eased 0.1 percent, compared to a 0.9 percent fall in Topix Core 30. So far this week, the

Topix Small is down 0.2 percent whereas the top 30 firms are down 1.4 percent.

Nikkei rises with easing US-China trade tensions

Asian Stock Markets

Japan's Nikkei share average rose on Monday as the dollars' rise against the yen supported some exporters after news of easing US-China trade tensions, but weakness in financial stocks kept wider gains limited.

The Nikkei ended 0.3 per cent higher at 23,002.37, after the dollar rose 0.5 per cent to 111.245 yen, hitting a fresh four-month high in Asian trade.

The Nikkei broke the psychologically important level of 23,000 for the first time since early February. Analysts see the next resistance level at 23,122.45, an intraday low marked on Feb. 2.

However, the broader Topix edged 0.1 per cent lower to 1,813.75, with only 1.29 billion shares changing hands, the lowest volume since early April.

US stock futures gained after Treasury Secretary Steven Mnuchin said on Sunday that the United States and China had agreed put their tariff skirmishing "on hold" to work on a wider trade agreement.

The S&P 500 E-mini futures were up 0.6 per cent, the Nasdaq 100 e-minis were 0.7 per cent higher with Dow e-minis also up 0.9 per cent.

Daiwa Securities research found that companies expect a 2 per cent rise in pre-tax profits for the fiscal year through March 2019, and most of them expect the dollar to trade at 105 yen on average.

A weaker yen boosts the profits Japanese earn abroad when they are repatriated.

TDK Corp rose 2.2 per cent, Daikin Industries was up 1.4 per cent and Nitto Denko gained 2.2 per cent.

Insurers and banks underperformed. MS&AD Insurance fell 4.0 per cent, while Mizuho Financial Group shed 0.8 per cent.

Elsewhere, Japan Tobacco slid 1.3 per cent after the company reported weaker domestic market tobacco sales in the month of April.

Stocks Drop in Asia as Facebook data flap spooks tech stocks

Asian Stock Markets

Stocks in Asia fell, following U.S. equities lower after a sell-off in technology shares bruised trader sentiment before a key Federal Reserve policy meeting.

Equities fell from Japan to Australia and technology stocks were the biggest drag on the MSCI Asia Pacific Index. U.S. shares slumped as the best performing sector this year was roiled by reports of a Facebook Inc. data breach and Apple Inc. efforts to develop its own screens.

After the bell, Oracle Corp. reported sales that underwhelmed investors and Nasdaq futures remained lower. Currencies were steady along with 10-year Treasury yields.

The tech sell-off, that began in Asia on Monday and deepened during the Europe and U.S. sessions, sent jitters through equity markets at the start of a busy week that culminates in the first U.S. interest rate decision under new Federal Reserve Chairman Jerome Powell.

Powell has hinted to investors that he’s open to lifting the policy rate four times this year, rather than the three currently reflected in dot-plot forecasts. Some on Wall Street expect the median projection to rise to four at Wednesday’s meeting, while others say there will be no change following a round of mediocre data and policy makers’ stated intentions to move gradually.

Japan’s Topix index fell 0.7 percent and the Nikkei 225 Stock Average slid 0.9 percent as of 12:30 p.m. in Tokyo.

South Korea’s Kospi index fell 0.4 percent.

Hong Kong’s Hang Seng Index retreated 0.6 percent.

Shanghai Composite Index was down 0.3 percent.

The yen fell 0.1 percent to 106.24 per dollar.

The yield on 10-year Treasuries was steady at 2.85 percent.  

Asian Stocks Mixed Before U.S. Inflation; Yen Down

Stocks put in a mixed session in Asia Tuesday ahead of a key U.S. inflation report that may affect the outlook for Federal Reserve policy tightening. The yen retreated as immediate concerns about a political scandal in Japan subsided.

Japanese stocks fluctuated before closing higher, while Hong Kong and Chinese shares drifted. Australian equities slid, weighed down by banks and miners. 

Futures on the S&P 500 Index were little changed. The yen gave up gains spurred yesterday by questions about the tenure of Japanese Finance Minister Taro Aso. The U.S. 10-year note yield held at 2.88 percent after a Treasury auction was broadly in line with expectations

Given the Abe administration’s strong support for a weaker yen since taking office in December 2012, the potential damage of a scandal surrounding a controversial sale of land had caught traders’ attention on Monday.

But with the finance chief rebuffing the idea of resignation, and no major ruling party members pushing for such a move, the affair offered no new fodder for investors Tuesday.


Focus now turns to American inflation and retail sales data, followed by reports on Chinese industrial production, retail sales and fixed-asset investment/ The U.S. inflation reading is the last major piece of data ahead of the Federal Reserve’s policy meeting next week.

U.S. politics also remain an issue, after President Donald Trump issued an executive order blocking Broadcom Ltd. from acquiring Qualcomm Inc., scuttling a $117 billion hostile takeover that had been subject of scrutiny over the deal’s threat to U.S. national security.

Japan’s Topix index gained 0.6 percent at the close in Tokyo.

South Korea’s Kospi index was up 0.4 percent.

Australia’s S&P/ASX 200 Index declined 0.4 percent.

Hong Kong’s Hang Seng Index fell 0.2 percent and the Shanghai Composite Index lost 0.5 percent.

S&P 500 Index futures were up about 0.1 percent. The underlying measure lost 0.1 percent Monday.

Asia shares on relief rally; U.S. job data revive risk appetite

Asian Stock Markets

A relief rally swept across Asian share markets on Monday after the latest U.S. jobs report managed to impress with its strength while also easing fears of inflation and faster rate hikes, a neat feat that whetted risk appetites globally. 

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS climbed 1.3 percent, poised for a third session of gains. 

South Korea .KS11 rose 1 percent while Australia's main index added 0.7 percent, boosted by mining shares on news that Australia could be exempt from new U.S. trade tariffs on steel and aluminium imports. 

E-Mini futures for the S&P 500 ESc1 put on another 0.3 percent. 

Japan's Nikkei .N225 jumped 1.2 percent, showing little immediate reaction as Prime Minister Shinzo Abe came under renewed fire over suspicions of cronyism involving the sale of state-owned land.

Inflation worries faded on Friday after U.S. data showed nonfarm payrolls jumped by 313,000 jobs last month, but annual growth in average hourly earnings slowed to 2.6 percent after a spike in January. 

The pullback in wages tempered speculation the Federal Reserve would project four rate hikes - or dot plots - at its policy meeting next week, instead of the current three. 

“The release threaded the stock needle perfectly, exhibiting strong overall net job adds alongside an increase in the participation rate and tepid wages suggesting labour demand is being met by new entrants into the workforce,” said analysts at JPMorgan in a note. 

 For now, Wall Street was happy to take the data at face value and the Dow .DJI jumped 1.77 percent, while the S&P 500 .SPX gained 1.74 percent and the Nasdaq .IXIC 1.79 percent. 

On the week, the S&P rose 3.5 percent, the Dow 3.25 percent and Nasdaq 4.2 percent.

The jobs news likewise lifted riskier currencies, including the Mexican peso and Canadian and Australian dollars, while weighing on the safe-haven yen. 

Those cross currents left the U.S. dollar a shade lower against a basket of currencies at 89.973 .DXY. The euro was last up a fraction at $1.2323 EUR=. 

The dollar edged down on the yen to 106.38 JPY=, having bounced 0.5 percent on Friday. 

Investors had trimmed holdings of yen last week on news U.S. President Donald Trump was prepared to meet with North Korea’s Kim Jong Un, a potential breakthrough in nuclear tensions in the region.

U.S. officials on Sunday defended Trump’s decision, saying the move was not just for show and not a gift to Pyongyang. 

The mix of brisk U.S. economic growth and restrained inflation was a positive one for most commodities. 

Spot gold XAU= was steady on Monday at $1,323.61 an ounce.

Brent crude LCOc1 futures rose 7 cents to $65.56 a barrel, after surging almost 3 percent on Friday. U.S. crude CLc1 futures rose 6 cents to $62.10 a barrel.

Asian stocks pull further off two-month lows as Wall St. bounces

Asian Stock Markets

Asian stocks pulled further away from two-month lows on Tuesday, lifted by Wall Street’s extended rebound from last week’s steep fall, but investors remained cautious ahead of U.S. inflation data later in the week. 

Spreadbetters expected a higher open for European equities, forecasting 0.25 percent gains for Britain’s FTSE and 0.3 percent for Germany’s DAX and France’s CAC.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 1.1 percent after sliding to its lowest level since Dec. 11 on Friday.

Australian stocks rose 0.6 percent and South Korea’s KOSPI climbed 0.65 percent. Japan’s Nikkei started higher but lost steam to slip 0.75 percent.

The Shanghai Composite Index was 1 percent higher, buoyed by global gains and suggestions of possible Chinese government support.

An affiliate of China’s securities regulator on Monday encouraged major shareholders of domestically-listed firms to increase their holdings after last week’s global selloff mauled Chinese stocks.

Wall Street’s three major indexes rose for the second day on Monday as investors regained some confidence after U.S. equities had their biggest weekly drop in two years. 

Still, caution lingered in the broader markets following the U.S.-led tumble in riskier assets last week and ahead of U.S. inflation data on Wednesday. A stronger-than-expected reading on price pressures could trigger a fresh wave of selling.

The 10-year Treasury note yield edged back to 2.849 percent after rising to a four-year peak of 2.902 percent on Monday.

The dollar index against a basket of six major currencies extended modest losses suffered overnight and dipped 0.25 percent to 89.987. The index edged back from a two-week high of 90.567 scaled late last week, when it had benefited as a safe haven in the wake of the global market selloff.

The greenback lost 0.3 percent to 108.285 yen, weighed by the sagging Nikkei. The euro added 0.15 percent to $1.2310.

The South African rand was little changed at 11.91 per dollar after slipping briefly following news that the country’s ruling party African National Congress had opted to sack President Jacob Zuma.

The rand had risen 2 percent over the past two days, helped by hopes that Zuma would step down, but ran into resistance as the latest news was seen potentially prolonging the political standoff.

The Australian dollar was steady at $0.7866 after rising about 0.6 percent overnight on the back of higher commodity prices and improvement in broader risk sentiment.

Copper prices also bounced further away from two-month lows as more stable global markets encouraged investors to return to commodities.

Copper on the London Metal Exchange extended an overnight rally to trade 1.4 percent higher at $6,927.00 per tonne.

Commodities were also supported by the dollar’s pullback from two-week highs. A lower greenback favors non-U.S. buyers by reducing the price of dollar-denominated commodities.

Brent crude rose 0.55 percent to $62.94 per barrel.

Spot gold was 0.3 percent higher at $1.326.51 an ounce.

Asian stocks try a tentative bounce

Asian Stock Markets

Asian share markets found a semblance of calm on Monday as S&P futures extended their bounce, though global investors were still fretting about the risks from looming U.S. inflation data after last week’s sharp sell-off. 

MSCI’s broadest index of Asia-Pacific shares outside Japan crept up 1 percent, having suffered a 7.3 percent drubbing last week.

Both South Korea and China gained 1.2 percent, while Japan’s Nikkei was closed for a holiday.

E-Mini futures for the S&P 500 rose 0.6 percent, adding to a late bounce on Friday.

European bourses were expected to open with solid gains, with futures for the London FTSE already up 1.4 percent.

Yet a relatively sharp 14-tick drop in Treasury bond futures suggested it was too early to sound an all-clear on volatility.

Particularly challenging will be U.S. consumer price data on Wednesday given that it was fears of faster inflation, and thus more aggressive rate rises, that triggered the global rout in the first place.

Median forecasts are for consumer price inflation to slow a little to 1.9 percent in January from a year earlier, mainly due to the base effect of a high reading in January 2017, while the core measure is seen ticking down to 1.7 percent.

A result in line with or below expectations would likely be a big relief, while anything higher could well spook investors, lift bond yields and batter stocks.

Aziz Sunderji, an economist at Barclays, suspects the inflation scare will prove to be transitory.

THE RETURN OF VOLATILITY:

But what a bump it was.

The benchmark S&P 500 fell 5.2 percent last week, its biggest decline since January 2016.

Ninety-six S&P 500 stocks were down 20 percent or more from their one-year highs, according to Thomson Reuters data.

In Asia, Hong Kong’s high-flying shares shed almost 10 percent for the week, while Japan lost 8.1 percent and South Korea 6.4 percent.

The pivotal gauge of S&P 500 volatility, the VIX, remained relatively elevated at 29 percent.

Yields on U.S. 10-year Treasury paper touched a four-year top of 2.885 percent, moving ever further above the S&P 500’s dividend yield of 2.34 percent.

The ascent of yields had offered some support to the U.S. dollar last week, but was proving of limited help on Monday as speculators returned to short the currency.

The euro clawed back 0.5 percent to $1.2288, after losing 1.8 percent last week, while the dollar eased 0.4 percent on a basket of currencies to stand at 90.118.

The dollar was steady on the yen at 108.71, aided in part by reports that Haruhiko Kuroda would be re-appointed as head of the Bank of Japan and likely continue the country’s ultra-loose monetary policy.

Commodities pared recent losses, with gold 0.6 percent firmer at $1,323.88 an ounce and off a five-week low of $1,306.81.

Brent crude futures rallied 59 cents to $63.38 a barrel, while U.S. crude for April added 68 cents to $59.88.

Brent lost nearly 9 percent last week and U.S. crude dropped 10 percent, the steepest falls since January 2016.

Asian shares flirt with 6-week low as U.S. yields creep higher

Asian Stock Markets

Asian shares still shaky after rout U.S. debt yields rise after Congress agree on budget deal. China trade data beats expectations

Asian shares flirted with six-week lows on Thursday as U.S. bond yields crept up towards four-year highs as investors fretted that low borrowing costs enjoyed by companies for many years may be endangered by the threat of rising inflation.

U.S. congressional leaders reached a two-year budget deal to raise government spending by almost $300 billion, a rare display of bipartisanship that should stave off a government shutdown but also widen the federal deficit sharply.

Combined with an expected economic boost from President Donald Trump’s planned tax cuts, the increased deficit spending could overheat already strong U.S. growth and accelerate inflation to levels not seen over a decade.

Such fears drove the 10-year U.S. Treasuries yield back up to 2.813 percent, near Monday’s four-year peak of 2.885 percent.

The Senate and the House were both expected to vote on the proposed deal on Thursday, amid some opposition on both sides of the aisle.

Share markets remained on edge after a big selloff in equities in the past few days on worries about the prospects of rising interest rates around the world, which would shut off the liquidity spigot that has underpinned an exuberant rally in riskier asset.

MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed, staying near its six-week low touched on Tuesday.

Japan’s Nikkei gained 0.4 percent, though it was still down more than six percent so far this week.
MSCI’s broadest gauge of the world’s stock markets has lost ground in seven of the last eight sessions until Wednesday, a period in which it slumped 6.8 percent.

U.S. stocks ran out of steam on Wednesday after an early surge, with the S&P 500 ending down 0.50 percent and the Nasdaq Composite losing 0.9 percent.

The Cboe Volatility Index, known as the VIX and often seen as investors’ fear gauge, fell 2.3 points to 27.73, but that was still more than twice the levels generally seen in the past few months.
Andrew Milligan, Head of Global Strategy at Aberdeen Standard Investments, said in a note it was not a surprise to see a market correction after a long period of low volatility

China’s trade data showed the country’s exports and imports beat market expectations in January, rising 11.1 percent and 36.9 percent from a year earlier respectively, underscoring the strength of the global economy.

The dollar was supported after the budget deal in Washington, rising against a broad range of currencies.

The dollar index rose to a two-week high of 90.403 on Wednesday and last stood at 90.251.
The euro dipped to $1.2276, staying near its lowest level in two weeks.

Southern European government bond yields tumbled on Wednesday, after Germany’s pro-European, pro-spending Social Democratic party took the finance ministry in a coalition government.
The dollar stood at 109.35 yen, recovering from Wednesday’s low of 108.92.

The New Zealand dollar fell to four-week lows after New Zealand’s central bank lowered its forecasts for inflation right out to 2020 while saying volatility in equity markets this week was a warning sign that global investors are nervous about the risk of higher inflation and rising interest rates.

The kiwi fell to $0.7190, a low last seen on Jan. 11.
Precious metals also dipped, with gold hitting a four-week low of $1,311.6.
Oil prices fell after U.S. data showed a build in inventories and record high crude production, raising worries of more selling.

Brent crude futures tumbled to a six-week low of $65.16 $ per barrel.
U.S. crude futures hit one-month low of $61.25 per barrel and last traded at $61.65.

Bullish bets on most Asian currencies drop as yields spike lifts dollar

Asian Stock Markets

Investors trimmed their long positions in most emerging Asian currencies in the last two weeks, a Reuters poll showed, as rising Treasury yields helped the dollar rebound from a three-year low touched in late January. 

There has been a steady climb in U.S. yields over the past two weeks on expectations the European Central Bank will tighten monetary policy, and on increasing worries that inflation is accelerating due to bigger paychecks.

The benchmark 10-year yields US10YT=RR rose to a four-year high of 2.88 percent, with traders adding to their positions for a faster pace of rate hikes, lending support to the dollar.

Among Asian currencies, bullish bets on the Chinese yuan CNY=CFXS dipped for the first time since December, while that on the Malaysian ringgit MYR= touched their lowest since November.

Long positions on the Singapore dollar SGD=D3 and the Taiwan dollar TWD=TP reached a near two-month low, according to the poll of 12 analysts, traders and fund managers.

Investors, however, turned more bearish on the Philippine peso PHP=PDSP, with short positions at their highest since November.

The peso has been the weakest in Asia against the dollar so far this year, shedding 2.8 percent, with vulnerability to capital outflows seen increasing due to deficit concerns.

The Philippine central bank projects there was a current account deficit of $100 million last year, the first since 2002, and it forecasts a deficit of $700 million this year.

Bullish bets on the Korean won KRW=KFTC were trimmed to five-month lows, while positions on Indonesian rupiah IDR= went from long to nearly neutral.

The won has lost about 1.6 percent so far this year, making it the second weakest currency in the region after the peso.

Bullish sentiment towards the Thai baht THB=TH weakened slightly, while the Indian rupee INR=IN, which has slid about 0.5 percent so far this year, saw bullish bets at their lowest since January 2017.

The Asian currency positioning poll is focused on what analysts and fund managers believe are the current market positions in nine Asian emerging market currencies: the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit and the Thai baht.

The poll uses estimates of net long or short positions on a scale of minus 3 to plus 3. A score of plus 3 indicates the market is significantly long on U.S. dollars.

Asian shares on edge as U.S. futures slip

Asian shares reversed their earlier gains on Wednesday as investors dumped U.S. stock futures for safer harbours, a sign market participants remain jittery after this week’s global markets rout.  

While most analysts believed this week’s distressed selling looks to have run its course for the moment, allowing volatility to abate a little, the prospect of monetary tightening across the globe remains a challenge for the long term.

Investors took their cues from a late rebound on Wall Street overnight, though many had an anxious eye on E-Mini futures for the S&P 500 which slipped about 1 percent in late Asian trading. Dow Minis were down 0.9 percent.
MSCI’s broadest index of Asia-Pacific shares outside Japan was a tad softer, having risen as much as 2 percent in early trade.

Japan’s Nikkei eased too but was still up 0.2 percent. Chinese blue chips and South Korea’s KOSPI index dropped more than 2 percent.

Hong Kong, Singapore and Indian stock markets were also in the red.

Bonds had started to see some buying again, a hint that risk appetite might be waning, which could trigger another spasm of stock selling.

U.S. 10-year yields nudged lower to 2.76 percent, after going as high as 2.80 percent earlier in the day.

It was a steep spike in yields last Friday that sparked the initial rout on Wall Street, forcing sales by a host of highly leveraged funds, which ramped up volatility and drove yet more selling.

Many of these were algorithmic funds crowded into similar trades - long stocks and short volatility. The selling then cascaded through their computer systems in a way almost beyond human intervention.

The pivotal gauge of S&P 500 volatility, the VIX, did come off almost 20 points overnight but was still relatively elevated at 29.98 percent.

In currencies, investors found safe harbour in the Japanese yen while riskier plays such as the Australian and New Zealand dollars declined.

The U.S. dollar fell 0.3 percent to 109.23 yen, still above Tuesday’s trough of 108.43.
The euro was a touch firmer at $1.2390, while the dollar was barely changed against a basket of currencies to 89.556.

Gold, another supposed safe haven, advanced 0.4 percent to $1,330.22 an ounce after touching a three-week low at $1,319.96.

Oil prices were strong too, with U.S. crude for April adding 51 cents to $63.89. Brent crude futures gained 59 cents to $67.45 a barrel.

Stock Sell-Off Rolls On; U.S. Futures Pare Decline

Asian Stock Markets

Asian stocks plunged for a second day as investors continued to flee riskier assets, though U.S. equity futures attempted a comeback as European trading began.

The Nikkei 225 Stock Average closed off its intraday lows, still weak enough to record a drop of more than 10 percent from a high on Jan. 23. 

Stocks across the region extended a global slump with virtually all shares on the 1,000-plus member MSCI Asia Pacific Index down. Euro Stoxx 50 futures fell more than 3 percent. The yen was flat after advancing earlier on haven demand. Treasuries declined after they also benefited from a flight to safety earlier.

Elsewhere, oil slumped for a third day and metals joined the sell-off after gaining on Monday. Bitcoin tumbled for a sixth day to trade around $6,000.

Many finance professionals were left scratching their heads to explain the severity of the moves in a short space of time. Anxiety was building about the outlook for monetary policy prior to Monday’s rout, with equities being tested by the surge in bond yields. Global shares had just last month risen to record highs on optimism for expanding profits and economic growth.

Even as the Dow suffered its worst point loss ever, some of the biggest investors remained relatively sanguine.

Euro Stoxx 50 futures fell 3.2 percent in early European trading. Futures on the S&P 500 Index declined 0.1 percent after falling as much as 3 percent. The underlying gauge tumbled 4.1 percent Monday.

Japan’s Topix index plunged 4.4 percent at the close in Tokyo, its biggest drop since November 2016, and the Nikkei 225 dropped 4.7 percent, paring a slump of as much as 7.1 percent.

Hong Kong’s Hang Seng Index declined 4.6 percent and the Shanghai Composite Index fell 3.4 percent.

South Korea’s Kospi index lost 1.5 percent.

The MSCI Asia Pacific Index plunged 3.4 percent, set for its biggest drop since June 2016, when stocks were hit by the Brexit vote.

Currencies

The Bloomberg Dollar Spot Index gained less than 0.1 percent.

The yen was flat at 109.09 per dollar after rising 1 percent on Monday.

The euro rose 0.2 percent to $1.2397.

The pound was steady at $1.3966.

Bonds

The yield on 10-year Treasuries rose about four basis points to 2.74 percent after plunging more than 13 basis points Monday.

German 10-year bund yields fell about three basis points to 0.71 percent.

Commodities

West Texas Intermediate crude was down 0.9 percent to $63.56 a barrel.

Gold rose 0.2 percent to $1,342.79 an ounce.

Nikkei rises for first time in 7 days, helped by softer yen, upbeat earnings

Asian Stock Markets

Japan’s Nikkei share average rose on Thursday, rebounding from a six-day losing streak and pushing most sectors into positive territory, as a weaker yen and upbeat corporate earnings drove the benchmark index higher. 

The Nikkei rose 1.7 percent to 23,486.11 after declining for six straight sessions.

Fujifilm Holdings jumped 12 percent after the company said it will take over Xerox Corp in a $6.1 billion deal, combining the U.S. company into an existing joint venture to gain scale and cut costs in the face of declining demand for office printing.

Sumitomo Mitsui Financial Group, Japan’s second-largest bank by market valuation, and Mizuho Financial Group, the third-largest lender, jumped 4.4 percent and 2.2 percent respectively after they both reported hefty gains in their stock portfolios.

Hino Motors soared 8.0 percent after the truckmaker raised its full-year net profit outlook.
On the other hand, Fujitsu Ltd dived 13 percent after its operating profit dropped 29.3 percent for the April-December period.

The broader Topix gained 1.8 percent to 1,870.44, with 32 of its 33 subsectors rising.

Nikkei takes breather after sharp gains; Fast Retailing,

Asian Stock Markets

Japan’s Nikkei share average took a breather on Wednesday after sharp gains, with some index-heavy stocks losing ground after the index hit a 26-year high. 

The Nikkei .N225 fell 0.3 percent to 23,798.90, staying slightly below its 26-year high of 23,951.61.
Index-heavy stocks such as chip equipment maker Tokyo Electron (8035.T) tumbled 2.0 percent and clothing store operator Fast Retailing (9983.T) shed 0.8 percent, contributing 30 negative points together to the Nikkei index.

The broader Topix .TOPX, however, was up 0.1 percent to 1,891.22.

Financial stocks, which invest in higher-yielding products such as foreign bonds, were higher, with the insurance sector .IINSU.T rising 1.6 percent and the banking sector .IBNKS.T adding 1.5 percent.

Yields on the 10-year U.S. Treasury note reached a 10-month high on Tuesday, after the Bank of Japan said it will trim its purchases of Japanese government bonds and U.S. corporate debt.

Dai-ichi Life Holdings (8750.T) soared 2.5 percent, T&D Holdings (8795.T) added 1.4 percent, Mitsubishi UFJ Financial Group (8306.T) advanced 1.4 percent and Mizuho Financial Group (8411.T) gained 1.0 percent.

A Top Asia Fund Manager Says This Stock Selloff Is a Time to Buy

Asia Stock Markets

As the stock selloff extended in Asia on Wednesday, one top money manager was anything but concerned.

Alan Richardson, who oversees about $446 million for Samsung Asset Management Ltd. in Hong Kong, says the four-day decline in the region’s equity markets is nothing more than investors locking in profits before they close their books for the year. The manager of the Samsung Asean Equity Fund, which has beaten 97 percent of peers over the past five years, says the broader trend of global economic growth is intact, and he’s using this opportunity to buy more shares.

Japanese stocks tumbled in Wednesday afternoon trading in Tokyo, with the benchmark Topix index heading for its biggest drop since March. The nation’s equities started sliding late last week and have been retreating ever since, with the fallout spreading to other markets. The sudden rout comes after big gains that sent a measure of Asian shares within touching distance of a record close. The region’s benchmark gauge has lost more than 2 percent in four straight days of declines.

Other strategists and fund managers contacted Wednesday had similar views:

Jason Low, (Senior investment strategist at DBS Group Wealth Management in Singapore) said stock investors are probably taking some profits off the table after doing “extremely well” and market participants likely winding down towards year end


Noriyuki Sato (Chief investment officer for Asset Management One SP in Singapore) said Asian stock markets are correcting as they have been “quite overbought”

Jonathan Ravelas (Chief market strategist at BDO Unibank Inc. in Manila) said this is just a pause that is healthy for the market considering the sharp rally it’s gone through in the past two weeks.

Narongsak Plodmechai (Chief investment officer at SCB Asset Management Co. in Bangkok) thinks Correction is “understandable” after a sharp rally and some investors may want to “lock up their profits before going for holiday in next few weeks.