Global Equity Rally Stymied in Asia Before Powell: Markets Wrap

Publikuota: 2018-02-27
Toru Hanai („Reuters“/„Scanpix“) nuotr.
Toru Hanai („Reuters“/„Scanpix“) nuotr.
 

Stocks in Asia ran out of steam as they tried to build on the recent rally that sent U.S. shares to a four-week high with investors betting monetary policy tightening won’t be too severe to derail the bull run in equities.

Japan’s stocks rose to the highest in more than three weeks after the S&P 500 Index recovered most of the losses emanating from the slump that hit global stock markets at the start of the month. The MSCI Asia Pacific Index of stocks pulled back from the day’s highs as S&P 500 Index futures fell. Declines in large-cap companies led shares in China lower.

The 10-year Treasury yield was steady after falling to a two-week low as investors await the first public comments from Federal Reserve Chairman Jerome Powell on Tuesday. Oil maintained its recent rebound.

The pace of U.S. monetary policy tightening remains a hot debate on Wall Street and traders are betting that Powell won’t seek to shock financial markets with overly hawkish comments this week. Federal Reserve Governor Randal Quarles made clear on Monday he thought a sustained period of higher growth might require higher interest rates, but not severe as to halt the expansion.

“In some ways his hands are a bit tied,” BNP Paribas Asset Management Senior Economist Steven Friedman told Bloomberg TV in New York. “The path of least resistance for him is to really stick to the script, which is to reiterate that there is a lot of underlying momentum in the economy, that gives them more confidence in their projections, but ultimately the path of interest rate increases is going to be gradual.”

In China, The FTSE China A50 Index of the country’s biggest companies slid 1.8 percent, snapping a six-day winning streak, as concerns about earnings emerged ahead of key legislative meetings in coming weeks. The losses come after China’s financial markets climbed on Monday following news that presidential term limits are set to be removed.

Elsewhere, the Bank of Korea left its benchmark interest rate unchanged at 1.5 percent in Governor Lee Ju-yeol’s last policy meeting. On Monday, European Central Bank President Mario Draghi said recent volatility, particularly in currency markets, deserves close monitoring and that the euro-area’s economy is expanding "robustly" and officials must remain persistent in providing stimulus.

Here are some key events scheduled for this week:

Powell testifies before a House panel on Tuesday. He’ll discuss the Fed’s Semi-Annual Monetary Policy Report and the state of the economy. Powell returns on March 1 before a Senate committee. Companies announcing earnings this week include: Vale, Bayer and Lowe’s. U.K. Prime Minister Theresa May delivers a speech Friday on Britain’s relationship with the European Union after Brexit. A barrage of data is expected out of Japan including retail sales and industrial production Wednesday, and capital spending Thursday. In China, the official and Caixin purchasing managers’ indexes on Wednesday and Thursday respectively may show growth momentum slowed slightly in February, though the signal may be clouded by the holidays.

These are the main moves in markets: Stocks

Japan’s Topix index climbed 0.9 percent at the close of trading in Tokyo. The Nikkei 225 Stock Average gained 1.1 percent. Australia’s S&P/ASX 200 Index rose 0.2 percent. South Korea’s Kospi index added 0.1 percent. Hong Kong’s Hang Seng Index fell 0.5 percent after reversing an earlier gain. The Shanghai Composite Index lost 1.1 percent. Futures on the S&P 500 fell 0.2 percent. The S&P 500 rose 1.2 percent Monday. The MSCI Asia Pacific Index advanced 0.3 percent.

Currencies

The Bloomberg Dollar Spot Index was virtually flat. The euro was little changed at $1.2321. The yen was steady at 106.91 per dollar. The pound was trading at $1.3958.

Bonds

The yield on 10-year Treasuries was flat at 2.86 percent, the lowest in almost two weeks. Australia’s 10-year yield fell two basis points to 2.76 percent.

Commodities

West Texas Intermediate crude lost 0.2 percent to $63.78 a barrel. Gold was steady at $1,332.28 an ounce.

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