Stocks Drop Amid EM Turmoil; Dollar Holds Gains: Markets Wrap

Traders begin work on the first day of 2018 trading at the Philippine Stocks Exchange (PSE), as the benchmark index hits a new record high, in the financial district of Makati city, Metro Manila, Philippines January 3, 2018. REUTERS/Romeo Ranoco

Asian stocks fell as continued pressure in many emerging markets intensified concerns of contagion and trade tensions persisted.

A day after currencies dropped across the region, it was the stock market’s turn in the hot-seat. Equities declined from Japan to Australia, with the slides in Hong Kong, China, the Philippines and Indonesia among the worst. European futures fell. The dollar was largely stable, holding onto gains on the back of robust U.S. data, while 10-year Treasury yields hovered around 2.90 percent. An emerging-market currency gauge held near a one-year low.

Investors remain cautious as turmoil in developing nations grips traders’ attention, with some pondering whether the troubles will spill into developed markets. Inflation in the Philippines exceeded 6 percent for the first time in nine years in August, joining Turkey as another emerging market with soaring prices.

“It has to get a lot worse before it gets better,” Kay Van-Petersen, global macro strategist at Saxo Capital Markets in Singapore, told Bloomberg Television. “When you get full contagion everything gets thrown out and I don’t think we are there yet. Before people talk about structurally buying EM you need to get some kind of comfort on the end of U.S. dollar strength and the end of the Fed tightening and I still think that plays out for a lot longer.”

The Indonesian rupiah hovered at its lowest level since the 1998 Asian financial crisis, while India’s rupee plumbed yet another record low. The Australian dollar received a short-lived boost after second-quarter economic growth beat expectations. Oil held losses amid the stronger dollar and a potential build at the Cushing, Oklahoma, storage hub.

Here are some key events coming up this week:

Executives from Facebook, Twitter and Google on Wednesday testify on social media, Russia meddling. The monthly U.S. employment report for August is due Friday.

These are the main moves in markets: Stocks

Japan’s Topix index fell 0.8 percent at the 3 p.m. close in Tokyo. Australia’s S&P/ASX 200 Index lost 1 percent. Hong Kong’s Hang Seng fell 2.2 percent. Shanghai Composite Index declined 1.2 percent. The S&P 500 Index futures were down 0.2 percent. FTSE 100 Index futures lost 0.3 percent as of 7:04 a.m. in London.

Currencies

The yen was flat at 111.49 per dollar. The offshore yuan held at 6.8593 per dollar. The Bloomberg Dollar Spot Index gained less than 0.1 percent after rising 0.4 percent Tuesday to the highest in almost three weeks. The euro traded at $1.1585. The MSCI Emerging Markets Currency Index slipped 0.2 percent after sinking 0.5 percent Tuesday to the lowest since May 2017.