Yen Extends Gain as Global Stock Rally Continues: Markets Wrap

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By Adam Haigh

Cornerstone Macro Partner Roberto Perli weighs in on the U.S. economy, Fed policy and the bond markets.

The yen extended an advance and a rally in global stocks continued in Asia as equity investors showed signs of warming to a world with inflation and a sustained pace of tightening in U.S. monetary policy following this month’s slide in risk assets.

Shares in Tokyo rose for the first time in four days with the Topix index bouncing off a four-month low. Stocks advanced in Australia as S&P 500 Index futures climbed. Hong Kong equities sealed their best three-day run in more than two years in shortened trading ahead of the Lunar New Year holiday.

The yield on the 10-year Treasury nudged closer to 3 percent, continuing its steady advance from last year’s low of 2.01 percent in early September. Metals gained on the dollar’s weakness and oil benefited from the return of risk appetite

Japan’s Finance Minister Taro Aso’s comments that the yen’s strength is not abrupt enough to intervene supported the Japanese currency’s rally into a fourth day as the dollar deepened its descent against all major peers.

Dwyfor Evans, MD and head of Asia-Pacific macros strategy at State Street Global Markets, on inflation and markets.

Bond traders increased their expectations for the number of Federal Reserve interest-rate hikes to four by the end of next year after a report showed U.S. consumer prices rose in January more than projected. The inflation figures gave little comfort to dollar bulls, who are instead focusing on the U.S.’s twin deficits, and also gave rise to debate among investors and traders on the breakdown in market correlations.

Stocks remain cheap relative to bonds and won’t be affected by higher long-term interest rates as long as the 10-year Treasury yield stays below 4 percent, according to Gina Martin Adams and Peter Chung, equity strategists at Bloomberg Intelligence. China, South Korea, Taiwan, Vietnam markets are closed Thursday.

The Australian dollar climbed after dipping when employment figures showed the number of full-time jobs dropped last month.

South Africa’s rand traded near its strongest level against the dollar in almost three years as President Jacob Zuma resigned under pressure from the ruling African National Congress.

Terminal users can read more in our markets blog.

Here are some important things to watch out for this week:

  • Lunar New Year celebrations for the Year of the Dog begin, affecting China, Hong Kong, Taiwan, Singapore, Malaysia and Indonesia. Chinese mainland markets are closed Feb. 15-21.
  • Earnings season continues in full swing.

These are the main moves in markets:

Stocks

  • Euro Stoxx 50 futures rose 0.7 percent in early European trading. S&P 500 futures climbed 0.6 percent. The benchmark rose 1.3 percent Wednesday.
  • Japan’s Topix index climbed 1 percent at the close in Tokyo and the Nikkei 225 Stock Average rose 1.5 percent.
  • Australia’s S&P/ASX 200 Index advanced 1.2 percent.
  • Hong Kong’s Hang Seng Index added 2 percent.
  • The MSCI Asia Pacific Index advanced 1.4 percent.

Currencies

  • The Bloomberg Dollar Spot Index fell 0.3 percent.
  • The yen climbed 0.7 percent to 106.29, adding to a 1.5 percent gain in the previous three days.
  • The Aussie dollar rose 0.4 percent to 79.54 per dollar.
  • The euro traded at $1.2468.
  • South Africa’s rand traded at 11.6627 per dollar.

Bonds

  • The yield on 10-year Treasuries was up two basis points at 2.92 percent.
  • German 10-year bund yields rose two basis points to 0.78 percent.

Commodities

  • West Texas Intermediate rose 1.3 percent to $61.41 a barrel, extending a 2.4 percent advance on Wednesday, its largest this year.
  • Gold climbed 0.2 percent to $1,353.43 an ounce.
  • LME nickel gained 1.1 percent to $14,250 a ton, the highest since May 2015.

 

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