Stocks Drop, Yuan Slides As Trade Optimism Dims: Markets Wrap
Stocks in Asia retreated at the start of the week after optimism over a potential U.S.-China trade deal ebbed in recent days. The yuan slumped, drawing little help from Chinese President Xi Jinping’s pledges to ease trade barriers.
Shares dropped from Tokyo to Shanghai, and U.S equity-index futures fell after White House economic adviser Larry Kudlow downplayed the potential for a quick deal with China. Hong Kong shares underperformed, reversing some of the gains from the biggest rally for the city’s stocks since 2011. U.S. Treasury yields retained most of their gains from Friday when a strong monthly jobs report reinforced the case for the Federal Reserve to keep raising interest rates. The pound rose on news of further progress in Brexit negotiations.
Politics, geopolitics and central banks will all be in focus in a busy week for investors. U.S. congressional elections, seen as a referendum on the policies of President Donald Trump, loom large on Tuesday. On the Brexit front, Prime Minister Theresa May is due to discuss the latest proposals with her cabinet Tuesday. Investors then turn their eyes to the Fed’s policy meeting. Though officials are expected to keep the benchmark rate unchanged at their penultimate 2018 meeting Thursday, clues will be sought for moves into 2019.
“If you are overweight equities you might want to wait if you are underweight equities it certainly gives you an opportunity to average in and buy a little bit more,” Raymond Lee, managing director, and portfolio manager at Kapstream Capital, said on Bloomberg Television. “As a bond manager, we are quite defensively positioned only because of some news that could come that is very hard to take a big conviction call — whether it’s U.S. mid-term elections, how this trade war is going to play out.”
The yen barely budged even as Bank of Japan Governor Haruhiko Kuroda hinted Monday that he wants to normalize monetary policy once the central bank gets closer to its price goal. The pound edged up after the Times reported May has secured concessions from Brussels that’ll allow her to keep all of Britain in a customs union with the EU and avoid a hard border in Northern Ireland. Oil was on track for the sixth day of declines as sanctions on Iran oil snapped back into place Monday.
Here are some key events coming up this week:
U.S. sanctions on Iranian oil flows go back into effect Monday EU’s chief negotiator Michel Barnier delivers a speech on Brexit to the Grandes Conférences Catholiques in Brussels On Tuesday, U.S. mid-term elections will determine whether Republicans keep control of Congress, and set the stage for Trump’s 2020 re-election bid Reserve Bank of Australia November policy decision Tuesday Federal Reserve policymakers are expected to leave the main interest rate unchanged Thursday at their penultimate gathering of 2018 Trump plans to meet Russian President Vladimir Putin on the sidelines of Armistice Day celebrations Nov. 11.
And these are the main moves in markets:
Japan’s Topix index fell 1.1 percent at the 3 p.m. close in Tokyo. Australia’s S&P/ASX 200 was down 0.5 percent. South Korea’s Kospi index declined 0.9 percent. Hong Kong’s Hang Seng Index tumbled 2.1 percent. It jumped 4.2 percent Friday. The Shanghai Composite Index was down 0.4 percent. S&P 500 Index futures lost 0.2 percent. The S&P 500 Index closed down 0.6 percent Friday when the Nasdaq 100 Index fell 1.5 percent. Futures on the U.K.’s FTSE 100 Index were little changed.
The yen was little changed at 113.27 per dollar. The offshore yuan slipped 0.3 percent to 6.9173 per dollar, while the onshore currency retreated 0.5 percent. The Bloomberg Dollar Spot Index was flat. The euro traded at $ 1.1397. The pound gained 0.3 percent to $ 1.3008.
The yield on 10-year Treasuries was at 3.20 percent after rising 8 basis points Friday. Australia’s 10-year bond yield climbed five basis points to 2.74 percent.
West Texas Intermediate crude lost 0.5 percent to $ 62.83 a barrel. Gold slid 0.1 percent to $ 1,231.92 an ounce.