Asian Stocks Slip With U.S. Futures on Trade Woes: Markets Wrap
Stocks in Hong Kong fell with U.S. equity futures and the Australian dollar after China called off planned trade talks with U.S. officials, potentially triggering an escalation in the protracted tariff war between the worlds two-biggest economies.
While the yen erased an early advance Monday, the Australian and New Zealand dollars remained lower as a new round of tariffs between the U.S. and China came into effect. Volumes across Asia were thinner than average due to holidays in the largest markets, China and Japan. European equity futures signaled a weaker open.
Most of the action was centered in Hong Kong, where stocks sank. Real-estate developers were under pressure amid concern they may suffer a potentially devastating blow to their biggest source of financing. Bank-to-bank borrowing costs jumped the most since December 2008 in the city as liquidity tightened ahead of forecasts for hikes to the underlying rate for the first time in more than a decade.
Read more on how Hong Kongs surging dollar is sending a warning on the housing market
The escalation in U.S.-China trade tensions will test two strong weeks of gains for Asian equities that lifted stocks off this years lows in part due to optimism that economies can weather the hit from trade restrictions. JPMorgan Chase & Co. said its starting to factor into its strategy a growing potential for a Phase III of the trade war next year affecting all Chinese imports, which would lead to weaker Chinese growth and hit U.S. stocks.
Next up this week is the Federal Reserves policy meeting that will likely see interest rates increased for the third time this year, with markets increasingly pricing for another one in December.
Indian stocks and the rupee slid as cracks appear in Asias best-performing stock market this year amid concerns about troubles in the non-bank financial sector. The central bank and regulator said they were monitoring recent developments in the nations markets and were ready to take appropriate actions. Financial shares were battered on Friday when volatility suddenly erupted.
Elsewhere, oil rose touched $72 a barrel after OPEC gave the cold shoulder to U.S. President Donald Trumps demand that it take rapid action to reduce oil prices. Metals declined, led by copper, amid the trade war. The Hong Kong dollar advanced for a third straight day as banks are seem likely to raise interest rates if the Fed hikes this week.
Here are some key events coming up this week:
European Central Bank President Mario Draghi speaks to the EU Parliament in Brussels Monday Japanese Prime Minister Shinzo Abe meets with President Donald Trump in New York to discuss trade. The Fed decision on Wednesday will be followed by a press conference with Chairman Jerome Powell. Thursday sees durable goods, GDP data and jobless claims for the U.S.These are the main moves in markets:
Hong Kongs Hang Seng Index dropped 1.5 percent as of 1:55 p.m. local time. Developers had among the biggest declines after Chinas Guangdong province said it was considering scrapping a system used by developers to get funding and as Hong Kong builders started cutting prices. Australias S&P/ASX 200 Index dipped. New Zealands S&P/NZX 50 Gross Index lost 0.4 percent. Futures on the S&P 500 slipped 0.2 percent. FTSE 100 Index futures fell 0.2 percent.
The yen was flat at 112.59 per dollar. The Aussie dollar declined 0.4 percent to 72.61 U.S. cents. The offshore yuan fell 0.3 percent to 6.8678 per dollar. The euro bought $1.1734. The Bloomberg Dollar Spot Index rose 0.2 percent.
The yield on 10-year Treasuries gained less than one basis point to 3.06 percent, a four-month high Friday. Treasuries wont trade until the London open due to the holiday in Tokyo. Australias 10-year bond yield held at 2.70 percent.
West Texas Intermediate crude jumped 1.8 percent to $72.04 a barrel. Gold fell 0.4 percent to $1,195.46 an ounce. LME copper dropped 0.7 percent to $6,316.50 a metric ton.