Asian Stocks Mixed Before Fed as Yen Fluctuates 

• Japan’s Topix index drops, while Chinese equities advance
• Yield on 10-year Treasury near highest level of the year

Asian stocks were mixed with Treasuries trading near the highest level this year as investors anticipated a near-certain rate hike from the Federal Reserve this week. Oil erased declines to halt a six-day losing streak.

Japan’s Topix index slipped for the first time in four days as the yen fluctuated. Chinese equities traded in Hong Kong advanced as data showed China’s economy started the year on a firm footing. The yield on 10-year Treasuries remained at around 2.62 percent. The euro held steady while the pound slipped as the U.K. parliament paved the way for Prime Minister Theresa May to begin two years of talks with the European Union over Britain’s exit.

Global stocks are within a whisker of a record high as analysts ratchet up expectations for the Fed to raise interest rates at a faster pace than was expected at the start of this year. Data from China showed industrial production climbed 6.3 percent in January and February combined, while retail sales advanced 9.5 percent. A major winter storm is expected to hit the U.S. East Coast early Tuesday.

“Markets fully expect a rate rise, so market reaction is likely to be muted unless the Fed disappoints which would lead to lower bond yields and a lower dollar, although that is not our expectation,” Mike Bell, global market strategist at JPMorgan Asset Management, wrote in a note. “All attention is likely to be focused on the press conference to see whether a more hawkish tone is struck, if so yields and the dollar could move higher still.”

What’s on the watch list this week:

• Traders view a quarter-point Fed hike this week as a virtual certainty after Friday’s data, and will be watching the policy decision for signals on what will come next.
• The Bank of Japan is set to keep its rates and yield-curve policy unchanged in its policy decision on Thursday. The Bank of England, Swiss National Bank and Bank Indonesia are also expected to stand pat with policy decisions.
• The Netherlands’ election takes place March 15 amid a growing diplomatic spat with Turkey.
  Earnings reports are due this week from firms including Oracle Corp., Tiffany & Co., and Prudential Plc.
• G-20 finance ministers gather in Germany for a series of meetings.
• OPEC will on Tuesday release its latest monthly report, which will offer an insight into the pace of production cuts. The IEA will release similar data on Wednesday.

Here are the main market moves:

Stocks

• The MSCI Asia Pacific Index was little changed as of 1:43 p.m. in Tokyo. The Topix index fell 0.1 percent after closing Monday at the highest since December 2015. South Korea’s Kospi rose 0.7 percent after jumping 1 percent in the previous session.
• Chinese shares traded in Hong Kong climbed 0.5 percent after surging 1.9 percent on Monday for the biggest gain since November. Taiwan’s Taiex advanced 0.5 percent. The Jakarta Composite Index climbed 0.7 percent to the highest since November.
• Futures on the S&P 500 Index were down 0.1 percent after the benchmark gauge ended Monday virtually unchanged. The Stoxx Europe 600 Index rose 0.4 percent, for a fourth straight gain.

Currencies

• The yen was little changed at 114.85 per dollar, after swinging between gains and losses of 0.1 percent. The Bloomberg Dollar Spot Index rose less than 0.1 percent.
• The euro was little changed at $1.0653, while the pound slipped 0.1 percent. The U.K. currency rose 0.4 percent on Monday as parliament gave Prime Minister Theresa May permission to trigger Brexit. Meanwhile, Scottish First Minister Nicola Sturgeon said she’ll start the legal process of preparing for a second independence referendum.

Bonds

• The yield on 10-year U.S. government bonds slid one basis point to 2.61 percent. That leaves it above the 2.60 percent level that Bill Gross says would herald the start of a bond bear market if it holds for a week.
• The yield on 10-year Australian government bonds fell one basis points to 2.93 percent.

Commodities

• Oil erased early declines, breaking a six-day losing streak. WTI traded at $48.43 a barrel, near the lowest in more than three months.
• Base metals extended gains, with iron ore rallying and copper advancing for a third day.

Source: Bloomberg – Asian Stocks Mixed Before Fed as Yen Fluctuates: Markets Wrap

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