The Japanese yen rose, the euro was down; Asian stocks sell off 

Asian stocks followed their U.S. counterparts lower after hawkish comments from Federal Reserve Chair Jerome Powell and weaker-than-expected economic data from China and Japan. The yen strengthened after the Bank of Japan reduced longer-dated bond purchases.

The MSCI Asia Pacific Index dropped, led by financials, technology and materials stocks. Most national benchmarks declined with Chinese and Hong Kong shares underperforming as China’s official manufacturing gauge fell the most in five years in February.

Data from Japan also added to the negative sentiment — factory output fell more than expected in January and retail sales declined last month from December. The dollar held gains and Australian bond yields climbed as 10-year Treasury yields steadied around the 2.90 percent level.

Powell opened the door to the Federal Reserve raising U.S. interest rates four times this year as he acknowledged stronger economic growth may prompt policy makers to rethink their plan for three hikes. He said he expects the next two years to be strong for the economy and that his personal outlook for growth has firmed since December.

Bond yields have soared in recent months amid speculation that U.S. monetary policy will be tightened at a faster pace than previously thought. For equity investors, that’s testing nerves — global stocks are poised for their worst month in two years — after years of loose global central bank policy helped push up valuations that look less appealing to some in an environment of higher rates.

“When you look at what the markets are telling you today and year-to-date is that interest rate hikes are expected and that’s in the price that’s getting priced in – the question is despite all the upbeat data that we see coming out of the U.S., is what is going to be the pace of these rate hikes and how quickly is it going to happen,” Medha Samant, Fidelity International investment director, told Bloomberg TV.

Chinese and Hong Kong stocks tumbled. The Hang Seng China Enterprises Index, which tracks the nation’s stocks traded in the city, slid 2.2 percent. The gauge is the worst performing benchmark in the world this month, down 9 percent, as record outflows from mainland investors and the weak manufacturing data added to challenges for Hong Kong’s equities.

Elsewhere, crude oil extended a decline as the International Energy Agency warned about seemingly unstoppable U.S. shale production.

Here are some key events scheduled for this week:

• The European Union will publish a draft Brexit treaty on Wednesday and U.K. Prime Minister Theresa May delivers a speech Friday on Britain’s relationship with the European Union.
• Japan capital spending is out on Thursday.

These are the main moves in markets:

Stocks

• The Topix index closed 1.2 percent down, while the Nikkei 225 Stock Average lost 1.4 percent.
• Hong Kong’s Hang Seng Index fell 1.3 percent.
• Kospi index fell 1 percent.
• Australia’s S&P/ASX 200 Index declined 0.7 percent.
• The MSCI Asia Pacific Index fell 1 percent.
• Futures on the S&P 500 Index fell 0.1 percent.

Currencies

• The Bloomberg Dollar Spot Index was little changed.
• The Japanese yen rose 0.2 percent to 107.11 per dollar.
• The euro was down less than 0.1 percent to $1.2227.

Bonds

• The yield on 10-year Treasuries rose less than one basis point to 2.90 percent.
• Japan’s 10-year yield rose less than one basis point to 0.05 percent.
• Australia’s 10-year bond yield rose five basis points to 2.81 percent.

Commodities

• West Texas Intermediate crude fell 0.5 percent to $62.68 a barrel.
• Gold fell less than 0.1 percent to $1,317.95 an ounce.
• LME copper fell 0.3 percent to $6,999 per metric ton.

Source: Bloomberg – Stocks Sell Off on Powell, Poor Data; Yen Climbs: Markets Wrap

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