Yen Gains on Korea Tensions While Asia Stocks Rise 

• Investors also assess China economic growth, Yellen comments
• Central banks in Australia, Europe on the calendar this week

Escalating geopolitical tensions sparked a rise in the yen. while most Asian equities advanced as investors assessed statements from China’s National People’s Congress and Federal Reserve Chair Janet Yellen.

The Topix and U.S. stock futures were lower as Japan moved to the highest possible alert level after North Korea fired four ballistic missiles simultaneously into nearby waters. Equities were mostly higher elsewhere, with shares in Hong Kong and Shanghai leading the advance. The 10-year U.S. Treasury yield was steady after gaining for five straight days. Gold was little changed while oil retreated.

The latest provocation from Kim Jong Un’s regime comes as South Korea and the U.S. undertake annual military drills that Pyongyang has called a prelude to an invasion. Tensions have been rising over North Korea, which also conducted a missile test during Abe’s state visit to the U.S. last month and is suspected of being behind the assassination of its leader’s half brother in Malaysia.

“The yen seems to be strengthening on the North Korean missile launch,” said Soichiro Monji, general manager of the economic research department at Daiwa SB Investments Ltd.
“Unless there are further moves I doubt markets will react to this longer than a day, but the situation in North Korea seems to be getting tenser. It’s difficult for investors to trade.”

Chinese small-cap stocks and power companies were the biggest beneficiaries from the ongoing annual legislative meetings in Beijing. Premier Li Keqiang set a 2017 growth target of “around 6.5 percent, or higher if possible” in a report to the NPC that reiterated the pursuit of neutral monetary policy this year.

As for U.S. monetary policy, Yellen joined a chorus of Fed officials who have suggested growth remains on track to warrant higher interest rates as early as next week’s central bank meeting. Fixed-income markets indicate a greater than 80 percent chance of a hike in March, with a monthly jobs report on Friday and a read on inflation the day of the decision looming as slight risks.

What’s ahead for the markets:

• Central banks in Europe and Australia will come into focus this week as the Fed now goes into a quiet period before its decision.

Here are the main moves in markets:

Currencies

• The yen rose 0.2 percent to 113.83 per dollar as of 1:40 p.m. in Tokyo. The South Korean won fell 0.1 percent. The Bloomberg Dollar Spot Index climbed 0.1 percent, after slipping 0.7 percent on Friday to halt a five-day rally.

Stocks

• The Kospi was little changed, erasing an earlier fall of 0.5 percent as Samsung Electronics Co. jumped more than 1 percent. The Topix lost 0.2 percent, after sliding 0.5 percent earlier.
• Futures on the S&P 500 declined 0.3 percent. The benchmark index gained less than 0.1 percent on Friday to end higher for a sixth straight week.
• Hong Kong’s Hang Seng added 0.4 percent while the Shanghai Composite Index increased 0.4 percent.

Bonds

• Yields on 10-year Treasuries fell less than one basis point to 2.47 percent, while those for Australian government bonds dropped one basis point to 2.80 percent.

Commodities

• Gold fell less than 0.1 percent to $1,233.95 an ounce. The metal had its worst performance of the year last week, falling 1.8 percent.
• Crude slipped 0.4 percent to $53.13 a barrel. Futures jumped 1.4 percent on Friday after a three-day drop.
• Copper gained 0.1 percent, after two days of declines.

Source: Bloomberg

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