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Hong Kong - Gold fell for a ninth day, its longest losing streak in a year, and the dollar strengthened after Federal Reserve Chair Janet Yellen said an interest-rate hike is likely in coming months.
Japanese shares led gains among Asian equities, while US and European stock index futures advanced.
Bullion declined with silver and platinum as the prospect of higher borrowing costs in the US damped the appeal of non-interest-bearing assets. The Bloomberg Dollar Spot Index climbed to its highest since March, while China’s yuan dropped by the most in two weeks as the central bank weakened the currency’s daily reference rate.
The yen sank to a one-month low versus the greenback and Japanese shares were set for their highest close in May after an aide to Prime Minister Shinzo Abe said a sales-tax increase will probably be delayed. Financial markets in the US and UK are shut for holidays.
Bloomberg’s gauge of the greenback’s strength is poised for its biggest monthly jump since September 2014, having surged as Fed Funds futures showed the odds of a US interest-rate hike by July more than doubled to 54%.
Yellen said on Friday that an improving American economy would probably warrant another increase in borrowing costs “in the coming months,” a view also expressed by several regional Fed chiefs in recent weeks. She was speaking after data showed growth picked up more than was previously estimated in the first quarter.
“The central issue for a lot of markets, including commodities, is now the timing of that next rate hike,” Ric Spooner, chief market strategist for CMC Markets Asia Pacific, said by phone from Sydney. “If we do see a June or July increase then that just increases the possibility of a second one this year.”
Japan released retail sales figures on Monday showing that growth stalled in Asia’s second-biggest economy, underscoring weakness in private consumption and increasing the likelihood that a planned sales-tax hike will be postponed.
France, Greece and Sweden are due to report gross domestic product data, while economic sentiment indicators for the euro area are also scheduled. Germany has inflation numbers coming and Finance Minister Wolfgang Schaeuble will be speaking at a conference in Berlin
Commodities
Gold for immediate delivery dropped as much as 1% to $1 200 an ounce, a level last seen in February. Money managers’ cut bullish bets on the metal by the most this year during the week ended May 24, according to US Commodity Futures Trading Commission data. Silver slid 1.8% as of 08:11, while platinum retreated 0.9%.
Copper futures slipped 0.9% in New York, snapping a four-day advance. The London Metal Exchange is closed on Monday.
West Texas Intermediate crude fell 0.3% to $49.20 a barrel ahead of this week’s meeting of the Organization of Petroleum Exporting Countries. Issues including a production freeze will be discussed at the June 2 talks, said Iraq’s Deputy Oil Minister Fayyad Al-Nima, who will head his ministry’s delegation.
Currencies
The Bloomberg Dollar Spot Index advanced 0.3%, headed for its best close since mid-March. South Korea’s won led losses among major currencies, sliding 1%.
The yen fell as much as 0.9% to ¥111.33/$. The currency’s only back-to-back quarterly gains since Prime Minister Abe came to power occurred when Japan’s sales tax was raised in March 2014.
The yuan slid 0.3 percent to 6.5818 per dollar, poised for its lowest close since January, after the People’s Bank of China weakened its daily fixing by 0.45 percent. With the U.S. poised to raise interest rates and pressure building on China to ease monetary policy, cash outflows will accelerate, said Song Yu, China economist for Goldman Sachs/Gao Hua Securities Co. in Beijing.
Stocks
Japan’s Topix index climbed 1.2%, led by exporters as the yen weakened. The country needs to delay increasing its sales tax until late 2019 to sustain its economic recovery, Hakubun Shimomura, an aide to Prime Minister Abe, said on Sunday on Fuji television. The increase was planned for April 2017.
The Shanghai Composite Index was up 0.2%, having recovered from earlier losses, and Hong Kong’s Hang Seng Index added 0.6%.
Philippine Long Distance Telephone jumped as much as 11% and Globe Telecom surged by the most in two months after the two agreed to pay $1.5bn for the telecommunications business of San Miguel, the Philippines largest company.
AirAsia rose to the highest in more than a year after chief executive officer Tony Fernandes said the region’s biggest discount carrier received an offer valued at about $1bn to buy its aircraft-leasing company.
Futures on the S&P 500 gained 0.2%, after the benchmark rallied 0.4% on Friday, and contracts on the Euro Stoxx 50 Index added 0.3%.
Belgian postal company Bpost SA said it failed to reach an agreement to buy PostNL of the Netherlands in a surprise announcement following speculation of an imminent merger. European truckmakers including Daimler, Volvo and Renault SA are said to face the European Union’s biggest cartel fine on record, the Financial Times reported.
Bonds
Yields on 10-year Australian bonds rose for the first time in three sessions, adding two basis points to 2.28% following a similar-sized move in US Treasuries on Friday.
The cost of insuring corporate bonds against nonpayment in Japan fell to an eight-month low. The Markit iTraxx Japan index dropped two basis points to 63 basis points, according to prices compiled by Citigroup.
The Markit iTraxx Asia index fell one basis point to 139.5 basis points, prices from Australia & New Zealand Banking Group show. That’s set for the lowest close in a month, according to data provider CMA.
Noble Group’s dollar bonds due January 2020 rose to their highest since November, pushing their yield down by 33 basis points to 15.77%. The company announced plans to sell some of its US operations and said CEO Yusuf Alireza has resigned, with two co-heads set to replace him.
"The resignation of the CEO is good news for bondholders as it shows that the board is serious about stabilizing the company’s profile by taking a less aggressive approach,” says Charles Macgregor, head of Asian high-yield research in Singapore at Lucror Analytics. “The sale of the Americas Energy Solutions will generate meaningful cash that should resolve liquidity concerns.”
