Stocks in Asia Fall on China Data, Hawkish Fed: Markets Wrap

Publikuota: 2018-06-14 09:29
Federal Reserve Board Chairman Jerome Powell speaks at his news conference after the two-day meeting of the Federal Open Market Committee (FOMC) on interest rate policy in Washington, U.S., June 13, 2018. REUTERS/Yuri Gripas
Federal Reserve Board Chairman Jerome Powell speaks at his news conference after the two-day meeting of the Federal Open Market Committee (FOMC) on interest rate policy in Washington, U.S., June 13, 2018. REUTERS/Yuri Gripas
 

Declines in Asian stocks accelerated Thursday after a raft of key Chinese data painted a picture of a softening economy just hours after the Federal Reserve struck a hawkish tone in its latest policy statement.

Equities across the region extended losses after Chinese economic indicators including retail sales and industrial output for May missed estimates. Earlier, the S&P 500 Index dropped after the Fed raised rates and signaled it may pick up the pace of increases this year. Ten-year Treasury yields declined after briefly crossing the 3 percent threshold following the Fed’s announcement. The dollar remained under pressure amid news the U.S. is discussing moving forward with tariffs on Chinese goods.

Fed Chairman Jerome Powell told reporters that unemployment and inflation are both low, and that raising rates too slowly or quickly could be harmful. He added that the bank won’t over-react to inflation levels above 2 percent. Powell also announced he would hold press conferences at every Fed meeting starting in January.

Attention in Asia quickly turned to the data dump that showed the world’s second-largest economy losing steam amid the threat of a worsening trade conflict with the U.S. China’s central bank held off from immediately raising borrowing costs following the Fed, and it’s lack of action was being seen as underscoring concerns over the economy. Meanwhile, the White House is debating whether to carry though $50 billion of tariffs on Chinese goods after talks between the U.S. and China failed to agree on a trade deal.

“The protracted trade negotiations will dampen sentiment,” Raymond Cheng, JPMorgan Private Bank head of Asia equity strategy, told Bloomberg Television. “China just has to loosen in terms of liquidity and adjust to boost the domestic economy just enough in order to counter the negative forces of trade friction.”

Next, investors move on to the European Central Bank, which will decide rates on Thursday. While no change is expected, investors are bracing for news on a potential end to the region’s quantitative-easing program. The Bank of Japan reports Friday.

Meanwhile, yen climbed as the BOJ cut some bond purchases in its regular operations. The Australian dollar slid after employment data came in below expectations. South Korea’s Kospi index was the worst-performing equity market in the region after a holiday and the won tumbled.

These are some key events to watch this week:

The European Central Bank rates decision comes Thursday with a briefing from President Mario Draghi. The Bank of Japan June monetary policy decision and news conference is Friday. FIFA expects more than 3 billion viewers for the World Cup that begins this week in Russia.

And these are the main moves in markets: Stocks

Topix index declined 0.8 percent as of 2:45 p.m. in Tokyo. Hong Kong’s Hang Seng Index dropped 0.9 percent. Kospi index declined 1.4 percent. Australia’s S&P/ASX 200 Index lost 0.1 percent. Futures on the S&P 500 Index fell 0.1 percent. The MSCI Asia Pacific Index fell 0.8 percent.

Currencies

The Bloomberg Dollar Spot Index fell less than 0.1 percent. The Japanese yen rose 0.2 percent to 110.07 per dollar. The euro rose 0.1 percent to $1.1802. The Australian dollar fell 0.3 percent to $0.7554.

Bonds

The yield on 10-year Treasuries fell two basis point to 2.94 percent. Japan’s 10-year yield fell less than one basis point to 0.045 percent. Australia’s 10-year yield fell six basis points to 2.71 percent.

Commodities

West Texas Intermediate crude was little changed at $66.63 a barrel. Gold was steady at $1,299.49 an ounce. LME copper fell 0.9 percent to $7,194 per metric ton.

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