Pound to Dollar rose, Euro little changed; Events investors will focus on in the coming days 

Stocks and U.S. futures tumbled in Asia, with Japanese equities sliding into a bear market as investors expressed concern about a lack of relief from the Federal Reserve’s monetary tightening.

The sell-off that began Wednesday afternoon with Fed Chairman Jerome Powell’s downplaying of the implications of market volatility, and his commitment to continue reversing quantitative easing, gathered pace Thursday in Asia. More than three quarters of all stocks in the MSCI Asia Pacific Index were down, and Japan’s benchmark Topix slid more than 2 percent. Other asset classes were more restrained, with the yen posting a modest gain and Treasuries steady after an overnight jump. Oil slumped below $48 in New York.

“They think the Fed has completely misjudged the situation and now it’s just a matter of just trying to find an exit while you can,” Kyle Rodda, a market analyst at IG Group in Melbourne, said of global investors. “We’re probably entering a stage now where markets have got it their head that we’re preparing for quite sustained downside going into 2019.”

While Powell and his colleagues did signal a less aggressive path for rate hikes in 2019, the quarter-point move on Wednesday and suggestion that recent market turmoil doesn’t unduly worry the U.S. central bank proved to have the bigger impact. Global stocks are set for their worst quarter since 2011, yet Powell in his press conference said that “we don’t look at any one market,” and that in the abstract “a little bit of volatility” probably doesn’t leave a mark on the economy.

European futures suggest declines when markets open there, and U.S. ones indicate a further drop Thursday, when the S&P 500 Index will open at a 15-month low. In Japan, bond yields headed closer to zero percent following the rally in Treasuries Wednesday. Bank of Japan Governor Haruhiko Kuroda will brief reporters later today after the BOJ left its policy settings unchanged.

Investors had hoped for a less aggressive approach after U.S. stocks tumbled into a correction amid concern that global growth is slowing. The Fed ignored repeated calls from U.S. President Donald Trump in the lead up to the decision to refrain from lifting borrowing costs again amid the volatility in financial markets.

“The Fed’s been a huge friend of the stock market and they are now a little bit of an enemy and probably become worse of an enemy before this is all over,” Bob Doll, Nuveen chief equity strategist and senior portfolio manager said on Bloomberg Television.

Beyond the Fed, trade and politics remain dominant themes. The U.S. Senate passed a stopgap fund bill to avert a partial federal shutdown and keep the government funded until Feb. 8. Meanwhile, Treasury Secretary Steven Mnuchin said America and China are planning to hold meetings in January to negotiate a broader trade truce.
You can read more on the markets on our Markets Live blog.

Here are some events investors will focus on in the coming days:

• Bank of Japan Governor Haruhiko Kuroda is due to give a briefing.
• Bank of England policy decision is due Thursday.
• U.S. personal income and spending data are due Friday, along with a gauge of inflation.

And these are the main moves in markets:

Stocks

• Japan’s Topix index tumbled 2.5 percent at the 3 p.m. close in Tokyo. It’s dropped 21 percent from this year’s high in January.
• Hong Kong’s Hang Seng Index decreased 1.1 percent.
• South Korea’s Kospi index fell 1 percent.
• Shanghai Composite Index lost 0.5 percent.
• Australia’s S&P/ASX 200 Index was down 1.3 percent.
• S&P 500 futures fell 0.6 percent. The S&P 500 fell 1.5 percent at the close in New York.
• FTSE 100 Index futures declined 1.9 percent.
• The MSCI Asia Pacific Index lost 1.6 percent.

Currencies

• The yen gained 0.4 percent to 112.08 per dollar.
• The offshore yuan traded at 6.9124 per dollar.
• The Bloomberg Dollar Spot Index dipped 0.2 percent.
• The euro was little changed at $1.1390.
• The British pound rose 0.2 percent to $1.2641.

Bonds

• The yield on 10-year Treasuries held at 2.75 percent, trading near the lowest level since April. They slid six points following the Fed’s decision.
• Australia’s 10-year bond yield declined five basis points to 2.34 percent, touching the lowest in about two years.

Commodities

• West Texas Intermediate crude slid 2.1 percent to $47.14 a barrel, trimming much of a 3.4 percent rally Wednesday.
• Gold rose 0.2 percent to $1,245.68 an ounce.

Source: Bloomberg

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