Asia Stocks Extend Declines; Dollar Holds Loss: Markets Wrap

Publikuota: 2017-11-10
Issei Kato („Reuters“/„Scanpix“) nuotr.
Issei Kato („Reuters“/„Scanpix“) nuotr.
 

Asian stocks fell after a rally that saw them touch a record high during the week, as Japan equities extended losses following abrupt swings on Thursday. The dollar held declines on concerns that U.S. tax reform is encountering stumbling blocks.

The Nikkei 225 Stock Average and the Topix index dropped as the yen maintained gains. The indexes suddenly retreated from their highest in about 25 years on Thursday as investors closed bets for the Friday settlement of some futures and options. The MSCI Asia Pacific Index fell for the first time this week, with stocks down in Sydney and Seoul, while other markets in the region were subdued after the previous day’s gyrations. Hong Kong and China stocks fluctuated as investors pondered news that China will allow overseas firms to take controlling stakes in local securities ventures and remove foreign ownership limits on its banks.

Global equities hit historic highs during the week as investors were encouraged by solid earnings and synchronized global economic growth. The MSCI Asia Pacific Index is on course to end up for a sixth-consecutive week. Of the more than 1,400 companies included in Japan’s Topix that have reported earnings in the current season, 63 percent have posted year-on-year growth, with earnings per share increasing by 16 percent on aggregate. Still, investors such as Oaktree Capital Group LLC’s Howard Marks, cautioned about the equity markets’ exuberance.

U.S. stocks dropped overnight after the Senate revealed that its tax plan would delay cuts to the corporate rate until 2019. Volatility spiked as investors appeared to be growing pessimistic about the prospects for meaningful U.S. fiscal reform, with lawmakers struggling to find a compromise that could pass both houses of Congress. The CBOE VIX Index had its biggest surge since August. The Nikkei Stock Average Volatility Index surged 23 percent on Thursday to the highest since April.

The Reserve Bank of Australia reiterated in its Statement on Monetary Policy released Friday a view that growth is picking up and inflation will remain subdued, indicating interest rates will stay at record lows. The New Zealand dollar fell after Finance Minister Grant Robertson said he expects to discuss the central bank’s focus on the 2 percent midpoint of its inflation target band when a new governor is appointed.

President Donald Trump is at the Asia-Pacific Economic Cooperation summit in Vietnam as he wraps up his tour of Asia dominated by trade and North Korea. It’s been a year since Trump’s election win and investors are taking stock of his promises to get tough on trade, cut taxes and slash regulation. Meanwhile, investors are keeping an eye on Saudi Arabia’s crackdown on corruption and its potential geopolitical implications.

Here are key events investors are watching:

U.S. consumer sentiment probably retreated in November after climbing a month earlier to the highest level since early 2004, economists project the University of Michigan to report on Friday. Among economic data in Asia on Friday: Thailand foreign reserves, Hong Kong GDP and India industrial production. European Central Bank Executive Board member Yves Mersch speaks at a conference in Windsor, the U.K. on Friday

These are the main moves in markets: Stocks

The Nikkei 225 fell 0.8 percent at the close in Tokyo and the Topix lost 0.7 percent. Australia’s S&P/ASX 200 Index fell 0.3 percent, and South Korea’s Kospi index was down 0.3 percent. The Hang Seng Index in Hong Kong and the Shanghai Composite Index were little changed. Futures on the S&P 500 Index were little changed. The underlying gauge fell 0.4 percent Thursday. The MSCI Asia Pacific Index fell 0.3 percent.

Currencies

The Bloomberg Dollar Spot Index was steady. It’s headed for the first weekly decline in four. The Aussie dollar was up slightly at 76.86 U.S. cents. It fell as much as 0.2 percent after the RBA statement. The New Zealand dollar fell 0.1 percent to 69.42 U.S. cents. The yen traded at 113.38 per dollar, heading for a weekly gain. The Malaysian ringgit advanced 0.3 percent to 4.1930 per dollar, the highest in seven weeks. The nation’s central bank on Thursday signaled that it may tighten policy amid sustained growth and quicker inflation. The euro was trading at $1.1648.

Bonds

Yields on 10-year Treasuries rose one basis point to 2.35 percent, about the same level where it ended last week. Australia’s 10-year bond yield climbed two basis points to 2.61 percent.

Commodities

West Texas Intermediate crude was little changed at $57.10 a barrel. It’s headed for its fifth weekly gain as it benefits from the anti-corruption drive in Saudi Arabia, which supports extending OPEC-led output cuts. Gold was steady at $1,285.80 an ounce, around a three-week high.

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