Stocks Rise, U.S. Dollar Rebounds as Irma Weakens: Markets Wrap

Japan’s Topix index was headed for its biggest gain in more than three months as a weaker yen gave a boost to exporters. S&P 500 Index futures jumped 0.5 percent and Treasuries fell, after Irma, the second devastating storm of the season, didn’t reach the feared Category 5 and looks to have spared Miami. Oil advanced as Gulf Coast refining capacity continued to recover after getting hit by Harvey. Risk appetite was also fanned by North Korea refraining from an expected missile test at the weekend.

“Investors were quite nervous last week over a possible North Korea missile launch or other incidents of that sort, but with the weekend behind us, it’s relief for now,” said Masahiro Ichikawa, a senior strategist at Sumitomo Mitsui Asset Management Co. in Tokyo. “It doesn’t feel like things are getting worse, although a bit of caution is still needed with market’s focus likely on the outcome of UN Security Council’s vote.”

Pyongyang warned of retaliation if the UN Security Council approves harsher sanctions, in a Monday vote, over its recent nuclear test. The regime “is closely following the moves of the U.S. with vigilance,” the North’s state-run Korean Central News Agency said Monday. Even so, some investors are looking for an eventual diplomatic resolution to the tensions that have whipsawed global assets since the start of August.

“The reality is that North Korea has demonstrated its nuclear power,” Christopher Wood, global equity strategist at CLSA, told Bloomberg Television at the CLSA Investors’ Forum in Hong Kong. “It’s a matter of time before the U.S. is forced to acknowledge the strategic reality. Once you acknowledge that North Korea is a nuclear power, you can focus on policies of containment. That would just make people to feel better about the region. I am overweight regardless of North Korea.”

With Federal Reserve speakers now in a blackout period before next week’s policy meeting, the focus this week is on assessing the impact of natural disasters on U.S. growth. New York Fed President William Dudley said in an interview last week with CNBC that he had marked down his third-quarter growth estimate "a touch," while reiterating that interest rates "are going to move gradually higher over time." U.S. retail sales and inflation data are also due this week.

The key events this week:

Malaysia’s factory output gained 6.1 percent in July from a year earlier, accelerating from June’s 4 percent. Japanese machinery orders were up 8 percent in July from June, when they fell 1.9 percent Also due this week, India’s trade surplus and China’s August industrial production, retail sales and fixed-asset investment. Australia releases jobs data on Thursday. It probably added fewer jobs in August than in July, with the unemployment rate seen holding at 5.6 percent.

Here are the main moves in markets: Stocks

The Topix index advanced 1.2 percent as of 2:17 p.m. Tokyo time, on course for its steepest advance since early June. South Korea’s Kospi index was up 0.7 percent and the S&P/ASX 200 Index in Sydney also added 0.7 percent. Hong Kong’s Hang Seng Index rose 0.9 percent, while gauges in China fluctuated. Futures on the S&P 500 Index climbed 0.4 percent. The underlying gauge fell 0.2 percent on Friday. The MSCI Asia-Pacific Index jumped 0.6 percent to hit the highest since December 2007.

Currencies

The yen fell 0.5 percent to 108.37 per dollar. The euro lost 0.2 percent to $1.2010. The Aussie was at 80.53 U.S. cents, down 0.1 percent. The Bloomberg Dollar Spot Index rose 0.2 percent. It lost 1.5 percent last week, its worst week since May. The offshore and onshore yuan declined after China’s central bank was said to have removed a reserve requirement on the trading of foreign-exchange forwards and the PBOC set its daily fixing at a weaker-than-expected level.

Bonds

The yield on 10-year Treasury notes climbed almost four basis points to 2.09 percent. Australian 10-year bond yields rose about four basis points to 2.61 percent.

Commodities

West Texas Intermediate crude added 0.9 percent to $47.91 a barrel in early trading after losing 3.3 percent on Friday. Gold declined 0.7 percent to $1,337.66.