Asia Stocks Rebound as Italy Woes Abate; Yen Gains: Markets Wrap

(180521) -- NEW YORK, May 21, 2018 (Xinhua) -- A trader works at the New York Stock Exchange in New York, the United States, on May 21, 2018. U.S. stocks closed higher on Monday. The Dow rose 1.21 percent to 25,013.29, and the S&P 500 rose 0.74 percent to 2,733.01, while the Nasdaq increased 0.54 percent to 7,394.04. (Xinhua/Wang Ying) - Wang Ying -//CHINENOUVELLE_CHINE012497/Credit:CHINE NOUVELLE/SIPA/1805220847

Asian stocks rebounded as bonds stabilized with investors deeming the market reaction to Italy’s political turmoil as overdone. The dollar held losses and oil stabilized following gains.

The MSCI Asia Pacific Index of stocks bounced after touching its lowest level since February Wednesday amid heightened fears Italy could leave the euro. U.S. 10-year yields hovered back above 2.84 percent. Energy shares paced gains as West Texas crude surged above $68 a barrel. Hong Kong and Chinese stocks outperformed as China’s official factory gauge underscored robust growth despite debt curbs and trade tensions. The greenback was little changed after its biggest decline in nearly three weeks and the yen pushed higher.

While the slump in Italian bonds that spilled over into global risk assets has abated, the prospect of snap Italian elections -- which could effectively become a referendum on the euro -- continues to loom and the timing of any vote remains unclear. The concerns add to a growing list that includes the strength of the global economy, North Korea and simmering trade tensions.

“We are going to be filled with tremendous uncertainty over the course of the summer,” David Ader, chief macro strategist at Informa Financial Intelligence, told Bloomberg Television. “I don’t see that at this point in time we have a big directional play. I see a lot of uncertainty, which results in a lot of volatility.”

Traders will get some distraction from geopolitics and trade, with the U.S. jobs report out on Friday, the last one before the Federal Reserve meets next month, when it’s expected to lift interest rates for the seventh time since the end of 2015. Morgan Stanley Chief Executive Officer James Gorman said the Fed is unlikely to be dissuaded from pursuing its path of monetary tightening as a result of recent volatility in financial markets.

Elsewhere, the Indonesian rupiah led a broader emerging-market currency rally after Bank Indonesia raised the benchmark interest rate for a second time in less than two weeks on Wednesday and flagged more increases to counter a selloff in nation’s currency and bonds.Italy’s 10-year yield retreated Wednesday after a successful bond auction and as politicians made a last ditch attempt to form a government.

These are some key events to watch this week:

The U.S. employment report for May is due Friday. It’s the last before the June Fed meeting. Automakers report May U.S. sales the same day. Also Friday: some onshore Chinese stocks join MSCI Inc.’s global indexes. On Saturday U.S. Secretary of Commerce Wilbur Ross will travel to Beijing for more talks with Vice Premier Liu He on topics including ZTE Corp. and trade.

These are the main moves in markets: Stocks

The Topix index rose 0.5 percent as of 2:15 p.m. in Tokyo. Australia’s S&P/ASX 200 Index gained 0.4 percent. Kospi index rose 0.4 percent. Hang Seng Index climbed 0.8 percent. Shanghai Composite Index climbed 1.3 percent. Futures on the S&P 500 Index were little changed. The S&P 500 rose 1.3 percent Wednesday, the most in more than three weeks. The MSCI Asia Pacific Index rose 0.7 percent.

Currencies

The Bloomberg Dollar Spot Index fell less than 0.1 percent. It lost 0.6 percent Wednesday, the largest decrease in almost three weeks. The Japanese yen rose 0.2 percent to 108.66 per dollar. The euro was steady at $1.1665 after climbing 1.1 percent. The pound added 0.1 percent to $1.3302.

Bonds

The yield on 10-year Treasuries fell one basis point to 2.84 percent. It jumped seven basis points on Wednesday. Australia’s 10-year bond yield was little changed at 2.65 percent. Italy’s 10-year yield sank 25 basis points to 2.92 percent Wednesday.