Asian Stocks Swing; Yuan Drops After Trade Miss: Markets Wrap

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By Adam Haigh

Asian stocks fluctuated Thursday as investors assessed the implications of the recent market turmoil that has elevated volatility. The yuan dropped the most since August 2015 after trade figures missed estimates and amid speculation policy makers will step up efforts to rein in gains.

Shares in Japan closed higher after almost flat-lining earlier, a pattern of swings that has unfolded this week in the wake of the recent rout. China’s stocks fell for a third day, while Hong Kong shares climbed. S&P 500 Index futures were up after dropping early in Asian trading. U.S. 10-year yields were steady after gains resulting from weak demand at a bond sale Wednesday that had pushed the yield back toward the recent four-year high.

 

“There are a lot of risks ahead and we’ve been lulled into a false sense of security over the last couple of years with central banks keeping rates low for a very long time,” Steve Goldman, Kapstream Capital head and portfolio manager, said on Bloomberg TV. “Risk assets are going to continue to perform well albeit with a lot more volatility than what we’ve seen in the past.”

Concerns that the Federal Reserve could accelerate its tightening schedule this year has triggered a surge in government bond yields. Chicago Fed President Charles Evans said Wednesday sustained inflation could force more hikes. For equity bulls, a lingering issue is the wisdom of doing what they always do — buy the dip — when more selling by speculators may be imminent after Monday’s break in volatility markets. Accounts of losses and liquidations at hedge funds specializing in the asset class were rife Wednesday morning even as Wall Street strategists urged investors to consider the market’s solid underpinning in economic growth and earnings.

For more on this week’s market turmoil:

The yuan fell the most since the currency’s devaluation in August 2015 after China reported a much narrower than expected trade surplus as imports jumped. The country has resumed its Qualified Domestic Limited Partnership plan after a two-year halt, granting licenses to about a dozen global money managers that can raise funds in China for overseas investments, Reuters reported on Thursday, citing people it didn’t identify.

Elsewhere, the New Zealand dollar fell after the central bank delayed the timing for when it expects to reach it’s inflation target and cut its growth forecast. Oil extended a slide after a report showing record crude production from U.S. fields. Gold dropped to a four-week low.
U.S. equities fluctuated through the session on high volume before ending lower after heavy selling in the final 15 minutes of trading Wednesday. While the Cboe Volatility Index eased back, it’s about 40 percent above its average since 1990.

Here are some events scheduled for the remainder of this week:

  • The U.K.’s monetary policy decision Thursday. The Bank of England may see Governor Mark Carney emphasize that continuing appreciation of the pound, which has strengthened almost 3 percent since the beginning of 2018, would help to contain inflation. This would stand in sharp contrast to the Reserve Bank of New Zealand which earlier Thursday said it expects its exchange rate to ease.
  • Earnings season continues with reports from Philip Morris, L’Oreal and Twitter.

Terminal users can read more in our markets blog.

These are the main moves in markets:

Stocks

  • Japan’s Topix index rose 0.9 percent at the close in Tokyo, and the Nikkei 225 Stock Average was up 1.1 percent.
  • Australia’s S&P/ASX 200 Index rose 0.2 percent. South Korea’s Kospi index added 0.8 percent.
  • Hong Kong’s Hang Seng Index was up 0.8 percent. The Shanghai Composite Index lost 1.6 percent, falling for a third day.
  • S&P 500 futures contracts rose 0.2 percent. The cash equity gauge fell 0.5 percent Wednesday, erasing gains of as much as 1.2 percent.
  • The MSCI Asia Pacific Index rose 0.4 percent.

Currencies

  • The Bloomberg Dollar Spot Index was little changed near the highest in more than two weeks.
  • The yen fell 0.3 percent to 109.64 per dollar.
  • The euro climbed 0.1 percent to $1.2273.
  • The British pound added 0.2 percent to $1.3905.
  • The Chinese yuan dropped as much as 0.8 percent.
  • The New Zealand dollar dropped 0.6 percent to 71.98 U.S. cents.

Bonds

  • The yield on 10-year Treasuries was at 2.84 percent.
  • Australia’s 10-year yield increased almost five basis points to 2.89 percent.

Commodities

  • West Texas Intermediate crude fell 0.2 percent to $61.68 a barrel, down for a fifth day.
  • Gold fell 0.5 percent to $1,312.29 an ounce.
  • The Bloomberg Commodity Index was little changed after falling 1.2 percent, its biggest tumble in 12 weeks.

— With assistance by Ruth Carson

 

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