Asia Stocks Mixed, Euro Falls on Draghi Comments: Markets Wrap
China markets closed second day, Hong Kong shut for holiday
Japan equities erase loss; yen gains while rand extends slide
Asian equities were mixed in thin trading while the euro slipped with emerging currencies after Mario Draghi’s dovish message to the European Parliament and as investors assessed the path for higher U.S. borrowing costs.
Stocks in Japan erased losses even as the yen strengthened. Hong Kong is on holiday Tuesday and markets in China are shut for a second day after the U.K. and U.S. were closed Monday, depressing volumes and limiting price movements. The euro dropped for a fourth straight day. South Africa’s rand extended losses after President Jacob Zuma survived a bid by some members of his party to oust him.
The key challenge for investors remains gauging the ability of the world’s economy to withstand rising borrowing costs. Despite the record highs posted by global equities, the rally in bond markets suggests traders are cautious. Donald Trump’s ability to come through with reform policies also remains an issue. Fed Bank of St. Louis President James Bullard said the new administration will need to fulfill the expectations that have driven the stock market higher.
“Washington does have to deliver at some point,” Bullard said in an interview on Bloomberg TV in Tokyo. “I think that is a concern going forward, whether the honeymoon period would end at some point and maybe the reality of American politics would settle in.”
He also said the dollar recently has weakened slightly because of “changes in perceptions of policies of other central banks in tandem with U.S. monetary policy.” European Central Bank President Draghi, speaking in Brussels, signaled there’s little urgency to start unwinding the central bank’s 2.3 trillion-euro ($2.6 trillion) bond-purchase program at the next policy meeting on June 8.
Don’t let the quiet start to the week fool you. Here are some of the key events coming up:
- Euro-area data this week may show the strongest economic confidence in a decade on Tuesday. The preliminary headline inflation rate for the region will come on Wednesday.
- France will release figures on consumer confidence and economic output, while Germany and Spain also report on inflation indicators.
- Fed speakers are out and about as the FOMC’s June 13-14 meeting approaches. Lael Brainard and Robert Kaplan will be in New York on Tuesday and Wednesday, respectively.
- The U.S. jobs report Friday may bolster the case for a rate hike, with a gain of 185,000 positions expected.
- Brazil’s central-bank decision on Wednesday will probably see a cut of 75 to 100 basis points from the current 11.25 percent, according to economists.
- China’s May manufacturing PMIs on Wednesday might indicate that the nation’s 2017 growth has already peaked.
- The EIA is due to release its monthly supply reports Wednesday.
Here are the main moves in markets:
- The euro fell 0.3 percent to $1.1128 as of 2 p.m. in Tokyo, dropping for a fourth straight session. The British pound lost 0.2 percent. The Malaysian ringgit and Mexican peso weakened at least 0.2 percent. The Bloomberg Dollar Spot Index climbed 0.1 percent.
- The yen was the only major currency to strengthen, rising 0.3 percent to 110.89 per dollar.
- The rand retreated 0.3 percent, adding to the previous session’s 0.6 percent decline.
- Japan’s Topix was flat after erasing an earlier decline of 0.5 percent. Data on Tuesday showed Japan’s jobless rate stayed at the lowest in more than two decades last month, but household spending remained mired in a long slump.
- Australia’s benchmark gauge rose 0.3 percent and South Korea’s Kospi dropped 0.4 percent, falling for a second day from a record. Singapore’s Straits Times Index slid 0.4 percent.
- Futures on the S&P 500 Index fell less than 0.1 percent. The underlying gauge closed at a record high on Friday.
- European stocks were little changed on Monday, while shares in Italy’s banks dropped as former Prime Minister Matteo Renzi raised the prospect of an early election.
- Gold was flat at $1,267.83 an ounce.
- Oil held gains near $50 a barrel after prices swung last week following the agreement by OPEC and its allies to extend cuts by nine months.
- The yield on 10-year Treasuries climbed one basis point to 2.24 percent.
- Australia 10-year yields fell two basis point to 2.39 percent.