Dollar, U.S. futures hold gains, Topix leads markets in Asia 

forex
  • Dollar, U.S. futures hold gains, Topix leads markets in Asia
  • Treasuries drop as odds jump for U.S. rate hike in March

Dollar and equity bulls found little cause for concern in Donald Trump’s address to Congress despite a lack of details, allowing investors to turn their focus on the timing of a U.S. interest-rate hike.

The Bloomberg Dollar Spot Index briefly pared gains while Trump spoke on Tuesday night in the U.S., only to rebound after he finished. S&P 500 futures slightly trimmed a pre-speech advance. The yield on 10-year Treasuries rose, adding to earlier gains after odds jumped for a Federal Reserve rate increase this month. The yen dropped for a third day, spurring a rally in Japanese equities, while gold slumped.

“Investors are feeling relieved,” said Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo. “Focus is shifting toward the Fed. The yen was already weakening this morning on that.”

The odds of an increase in March for U.S. interest rates rose to more than 60 percent, pushing up the dollar and dragging Treasuries lower. Federal Reserve Bank of New York President William Dudley said the case for tightening has become a lot more compelling. Fed Bank of San Francisco President John Williams said he expects a rate increase to receive “serious consideration” at this month’s meeting.

Traders sifted through a parade of other news on Wednesday in Asia before the U.S. president’s address. China’s official factory gauge firmed in February as producer prices rebounded. The Australian dollar erased an early decline as the nation’s economy grew faster than expected.

Trump in his speech urged Americans to abandon conflict and help him remake the fabric of the country, a moment he hopes will turn the page on his administration’s chaotic beginning and bring clarity to his policy agenda. He offered few new proposals and Trump made no suggestions on how he would pay for his plans, including a replacement of Obamacare, a tax overhaul including cuts for the middle class, $1 trillion in infrastructure investment and a large increase in defense spending.

The U.S. president’s commitment to spur growth by boosting spending and easing regulation helped fuel a stock rally after his election that reverberated around the world, sending the value of global equities above $70 trillion and propelling the dollar higher. The question facing investors hinges on whether Trump can deliver enough of a plan to appease the optimists amid signs investors’ patience is waning. In the days leading up to the speech, investors showed an unwillingness to add to riskier bets with stocks near all-time highs.

The speech “has enough to keep markets happy for now,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which manages about $127 billion. “It didn’t have a lot of details, but then maybe it never could.”

What traders are looking at in the days ahead:

  • Fed speakers aren’t finished talking. There are other officials lined up for this week, including Chair Janet Yellen, who speaks in Chicago on Friday.
  • The Chinese People’s Political Consultative Conference, an advisory body of more than 2,000 political elites, business executives and others, opens its annual session in Beijing on March 3.

Here are the main moves in markets:

Currencies

  • The Bloomberg Dollar Spot Index rose 0.4 percent as of 3:24 p.m. in Tokyo, climbing for a fourth straight day. The yen slid 0.6 percent to 113.48 per dollar, for a third day of losses.
  • The Aussie dollar increased 0.1 percent, after reversing an earlier decline of 0.3 percent. The country’s gross domestic product expanded 1.1 percent in the fourth quarter, higher than estimates for 0.8 percent growth, as households saved less and spent more.

Stocks

  • Futures on the S&P 500 Index rose 0.2 percent, after climbing as much as 0.4 percent before Trump’s speech. The benchmark index finished February with its best monthly gain since March, climbing 3.7 percent.
  • Japan’s Topix index increased 1.2 percent. The gauge completed a fifth straight monthly advance in February, the longest winning streak since early 2015.
  • The Stoxx Europe 600 Index added 0.2 percent after four straight days of losses.
  • Hong Kong’s Hang Seng climbed 0.1 percent and the Shanghai Composite Index added 0.2 percent. China’s manufacturing data gives top officials gathering in Beijing a solid economic backdrop as they seek to rein in financial risks.

Bonds

  • Yields on 10-year Treasuries rose two basis point to 2.41 percent, climbing for a third straight day. Two-year yields rose three basis points, after jumping seven basis points on Tuesday.
  • Australian benchmark yields climbed eight basis points to 2.80 percent.

Commodities

  • Gold dropped for a third day, falling 0.3 percent to $1,244.38 an ounce after completing a 3.1 percent gain in February.
  • Oil rose 0.1 percent to $54.08. Crude ended last month with an increase of 2.3 percent.
  • Copper added 0.6 percent, advancing for a fourth straight session.

Source: Bloomberg

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