Caution Prevails as China's Xi Delivers Key Speech: Markets Wrap

Asian equities were mixed, despite fresh records for U.S. stocks, while the dollar rally from the start of the week continued to peter out. Xi said China was pushing through reforms in a systematic way as he warned of “severe” challenges in a 3 1/2-hour long speech that kicked off the week-long event and laid out a road map to turn the nation into a leading global power by 2050.

The Bloomberg dollar index fluctuated. Negotiations over the future of the North American Free Trade Agreement were extended into the first quarter of 2018 in a bid to resolve differences after Canada and Mexico rejected what they see as hard-line U.S. proposals. That sent the Mexican peso more than 1 percent higher on Tuesday and it was holding those gains in early Asian trading.

Markets have been stable with a lack of volatility going into the start of the Communist Party Congress. However, in the past the meetings coincided with an average 3.3 percent drop on the benchmark Shanghai Composite Index and a further 3.3 percent in the following five trading days. The reaction on Wednesday was muted: the yuan inched higher as did the Shanghai Composite Index.

U.S. President Donald Trump’s choice for the next chair of the Federal Reserve, which has been a focus for markets in recent weeks, will be unveiled before he leaves Nov. 3 for an 11-day trip to Asia and Hawaii, a person familiar with the process said Tuesday. John Taylor was said to have impressed Trump in an interview, buoying gains in the greenback earlier this week given the assumption by many that he would favor tighter policy. Trump also tried to rally support for his tax plan in a speech on Tuesday.

The pound reversed losses that came after Governor Mark Carney said the Bank of England is making contingency plans for a “hard” exit from the European Union. The euro also recovered after falling when Spain cut its growth forecast for 2018 to 2.3 percent from 2.6 percent, acknowledging the impact of an escalating political crisis in Catalonia, a region that accounts for a fifth of the country’s output. The Spanish state is turning up the pressure on separatist leaders to drop their push for independence.

Markets in Malaysia, Singapore and Sri Lanka are closed for holidays.

Here are some key events coming up this week:

Among Fed speakers lined up this week are New York Fed President Bill Dudley and Dallas Fed President Robert Kaplan on Wednesday. European Central Bank President Mario Draghi speaks on Wednesday at the “Structural Reforms in the Euro Area” conference in Frankfurt. China releases data for GDP, industrial production and retail sales on Thursday.

Here are the main moves in markets: Stocks

Japan’s Topix index fluctuated as of 2 p.m. in Tokyo and Australia’s S&P/ASX 500 Index was up 0.1 percent, while South Korea’s Kospi index slipped 0.1 percent. Hong Kong’s Hang Seng Index was flat, while the Shanghai Composite Index rose 0.3 percent. Futures on the S&P 500 Index were little changed. The underlying gauge rose 0.1 percent to close at a fresh all-time high in New York. The MSCI Asia Pacific Index added 0.1 percent. The MSCI Emerging Market Index rose 0.1 percent after dropping 0.5 percent in the previous session.

Currencies

The Bloomberg Dollar Spot Index was little changed. The euro was at $1.1766 after falling 0.3 percent on Tuesday. The pound was at $1.3186. It slipped 0.5 percent on Tuesday. The yen traded flat at 112.23 per dollar. The New Zealand dollar fell 0.3 percent to 71.54 U.S. cents. New Zealand First will be in a position on Thursday afternoon to make an announcement on a government.

Bonds

The yield on 10-year Treasuries was little changed at 2.3 percent. Australia’s 10-year yield fell four basis points to 2.72 percent.

Commodities

West Texas Intermediate climbed 0.7 percent to $52.07 a barrel. Gold was little changed at $1,286.27 an ounce.