Traders review: Yen little changed, Aussie jumped, New Zealand dollar fell
Asian stocks retreated as banks slumped and oil touched the lowest level since November. Bonds rallied amid lingering inflation concerns even after Federal Reserve Chair Janet Yellen suggested weak readings won’t persist.
- The yen was little changed at 109.60 per dollar, after climbing 0.5 percent Wednesday. The Bloomberg Dollar Spot Index was down less than 0.1 percent.
- The Australian dollar jumped 0.4 percent after employment surged in May, led by a rebound in full-time positions, sending the jobless rate to the lowest level in more than four years.
- The New Zealand dollar fell 0.6 percent after data showed the economy grew less than expected in the first quarter as a rebound in dairy production was offset by a drop in construction.
Energy and raw-material shares had the biggest declines on the MSCI Asia Pacific Index as oil traded below $45 a barrel. Australian bonds followed a rally in Treasuries as data showed U.S. consumer prices excluding volatile food and fuel had the smallest year-over-year gain since May 2015. U.S. equity futures fell after a report that investigators are probing whether President Donald Trump attempted to obstruct justice. The Aussie dollar jumped after an encouraging jobs report.
“It may be no surprise to find U.S. data having a more profound impact on trade as compared to the Fed’s rhetoric with the market growing less convinced,” said Jingyi Pan, a Singapore-based analyst at IG Asia Pte Ltd. “The drop in crude oil prices and the corresponding unloading of energy shares in the region, meanwhile, seems to be the primary drag on regional bourses.”
Yellen played down a softening of price pressures in the last few months and voiced confidence the central bank was on course to hit its 2 percent inflation goal. The Fed’s actions and words struck a careful balance between showing resolve to continue tightening in response to falling unemployment while acknowledging the persistence of unexpectedly low inflation this year.
“The global reflationary rebound that began in early 2016 remains intact, but momentum is slowing,” said Mikio Kumada, Hong Kong-based global strategist at LGT Capital Partners. “The upswing in the tangible economic data has generally lagged the sentiment surge, leaving room for a reality check.”
Policy makers agreed to raise their benchmark lending rate for the third time in six months, maintained their outlook for one more hike in 2017 and set out some details for how they intend to shrink their $4.5 trillion balance sheet this year. Hong Kong followed the Fed’s move, elevating the risk of a selloff in the world’s priciest housing market.
Political drama in Washington also weighed on markets. The special counsel investigating Russia’s interference in the 2016 election plans to interview two top U.S. intelligence officials about whether Trump sought their help to get the FBI to back off a related probe of former National Security Adviser Michael Flynn, according to three people familiar with the inquiry.
Here are the key events investors will be watching this week:
- The Bank of Japan concludes a two-day meeting on Friday. While economists don’t expect any significant changes to monetary policy, they will parse the BOJ’s statement and Governor Haruhiko
- Kuroda’s comments for clues to the outlook for inflation.
- Central banks in Switzerland, Indonesia and Britain are also scheduled to weigh in with policy decisions this week.
- France reports on inflation and the U.K. releases retail sales data.
Here are the major movers:
- S&P 500 futures dropped 0.2 percent as of 1:47 p.m. in Tokyo. The gauge fell 0.1 percent on Wednesday, while the tech-heavy Nasdaq indexes retreated 0.4 percent. The Dow Jones Industrial
- Average edged higher to a fresh record.
- Japan’s Topix declined 0.3 percent and South Korea’s Kospi lost 0.7 percent. Australia’s S&P/ASX 200 Index fell 1.3 percent, with financial shares tumbling while energy and raw-material companies dropped more than 2 percent.
- Hong Kong’s Hang Seng slid 1.1 percent to the lowest since May, while the Shanghai Composite Index retreated 0.1 percent.
- The yield on 10-year Treasury notes rose less than one basis point to 2.13 percent, after dropping 8.5 basis points Wednesday to 2.13 percent, the lowest level since November.
- Australian benchmark yields lost 5 basis points to 2.35 percent, paring steeper declines after the jobs report.
- West Texas crude futures fell 0.1 percent to $44.69 a barrel after dropping 3.7 percent the previous session as U.S. gasoline supplies unexpectedly rose for a second week. Oil has declined almost 8 percent this month amid speculation increasing U.S. supplies will offset production curbs by OPEC and its allies.
- Gold rebounded 0.3 percent to $1,264.86 an ounce, after sliding 0.5 percent the previous day, as investors weigh the probability of future U.S. interest rate hikes.
- Iron ore futures dropped more than 2 percent.