Asia Emerging-Market Stocks Gain While Topix Slips: Markets Wrap 

• Dollar poised for biggest weekly loss in more than a month
• Indonesian shares reach record; Treasuries move higher

An equities rally spurred by the Federal Reserve’s outlook found some life in Asian emerging markets, even amid a slump in Japanese and U.S. shares. The dollar was steady after a two-day decline.

Stocks in Indonesia reached a record and markets from Malaysia to South Korea climbed, helped by the weaker U.S. currency, with the Bloomberg Dollar index heading for its biggest weekly loss since early February. Shares in Tokyo slumped, weighing down the MSCI Asia Pacific Index after it Thursday posted its biggest gain since November. The S&P 500 Index’s post-Fed rally ran out of steam as the gauge climbed to within 0.5 percent of an all-time high. Treasuries recovered some of Thursday’s declines.

Global stocks are on course for the best week since January after the Fed raised its benchmark lending rate a quarter point without accelerating the timetable for future hikes. Investors largely anticipated the tightening and Treasury yields had climbed with the dollar on speculation the central bank might signal a faster pace of tightening.

“A less hawkish monetary policy in the U.S. is more likely to push assets outside of the U.S. into higher-risk, higher-return markets,” James Woods, a Sydney-based investment analyst at Rivkin Securities, said in a phone interview. “A weaker dollar is supportive of those emerging markets generally. I’m not sure whether its going to be long-lived though. People are going to get back to focusing on the next Fed hike, and also Trump’s policies which would be dollar supportive.”

China’s central bank also raised borrowing costs this week and the Bank of Japan left its monetary policy setting unchanged. The pound gained Thursday as some Bank of England policy makers said they may not be far behind Kristin Forbes who’s leaning toward raising interest rates.

Volatility is retreating across the globe after the central bank policy decisions. At the same time, the defeat in this week’s Dutch elections of anti-immigration candidate Geert Wilders is being seen as a blow to populist political leaders, easing concerns ahead of French elections. A gauge of volatility on the Euro Stoxx 50 Index plunged 26 percent on Thursday, the most on record.

“Volatility is scarily low and there’s just a lot of complacency out there,” James Audiss, a senior wealth manager at Shaw and Partners in Sydney, said in a phone interview. “After we get through the big macro events with governments and elections, we have to start to look to corporate earnings. That’s where it becomes not so much a systemic stock market move as stock selection.”

What investors will be watching:

• The focus Friday will be a meeting between Donald Trump and Angela Merkel, while Steve Mnuchin attends his first G-20 finance chiefs gathering in Germany as U.S. Treasury secretary. He repeated his view on Thursday in Berlin that the long-term strengthening of the dollar is in the best interest of the U.S. economy and that it reflects confidence in the world’s reserve currency.
• Rex Tillerson continues his first trip through Asia as U.S. secretary of state, stopping in South Korea before heading to Beijing. At a joint briefing in Tokyo with foreign minister Fumio Kishida, he called for a strong alliance between the U.S., Japan and South Korea to counter Kim Jong Un’s regime.
• Economic data on Friday include U.S. industrial production for February, while Tiffany & Co. is scheduled to release earnings.

Here are the main moves in markets:

Stocks

• The MSCI Asia Pacific Index retreated 0.1 percent as of 3:04 p.m. in Tokyo, after closing Thursday at the highest level since June 2015. Japan’s Topix fell 0.4 percent, heading for its biggest weekly decline in more than a month.
• The MSCI Emerging Markets Index rose 0.2 percent. The Jakarta Composite Index gained as much as 0.7 percent to a record, after a 1.6 percent surge on Thursday. India’s Sensex Index climbed 0.4 percent, taking its gains for a holiday-shortened week to 2.6 percent, the most since the end of January.
• New Zealand’s S&P/NZX 50 Index increased 0.1 percent. Australia’s S&P/ASX 200 Index rose 0.2 percent. South Korea’s Kospi gained 0.6 percent.
• Hong Kong’s Hang Seng and the Hang Seng China Enterprises Index added at least 0.3 percent, after soaring the most since May on Thursday.
• The S&P 500 slipped 0.2 percent Thursday, while the Stoxx Europe 600 Index rose 0.7 percent.

Currencies

• The Bloomberg Dollar Spot Index was little changed after dropping 0.2 percent on Thursday on top of a 1.3 percent post-FOMC drop. The gauge is down 1.2 percent for the week, the most since the period ended Feb. 3.
• The yen edged 0.1 percent lower to 113.37 per dollar, paring its biggest weekly gain in more than a month.
• The pound slipped less than 0.1 percent to $1.2355. The currency is up 1.5 percent for the week, its biggest gain since January.

Bonds

• The yield on 10-year Treasuries fell one basis point to 2.53 percent, after rising five basis points on Thursday. The rate dipped below 2.50 percent following the Fed decision. It traded above 2.60 percent earlier in the week.
• Australian 10-year yields rose for the first time in five days, climbing five basis points to 2.86 percent. The rate tumbled 10 basis points on Thursday.
• The yield on New Zealand’s benchmark advanced three basis points to 3.28 percent, after also dropping 10 basis points in the previous session.

Commodities

• Oil advanced 0.1 percent to $48.82, heading toward its first weekly gain in three weeks.
• Gold was steady after a two-day gain, trading at $1,227.02 an ounce and poised for a 1.9 percent increase for the week.

Source: Bloomberg

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