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Hong Kong - Asian stocks rose and the dollar weakened before remarks by Federal Reserve chair Janet Yellen that will help shape expectations for US monetary policy.
UK equity index futures fell as polls suggested the nation’s vote on European Union membership will be close.
The MSCI Asia Pacific Index climbed to a one-week high, led by Japanese shares as the yen weakened for the first time in eight days.
FTSE 100 Index futures declined and the pound halted its biggest two-day jump since 2008 as one survey of British voters put the “Leave” campaign in front, casting doubt on the likelihood that the UK will stay in the EU after Thursday’s referendum. The Bloomberg Dollar Spot Index slipped for a fifth day, its longest losing streak in 11 weeks. Oil fell to about $49 a barrel, falling with copper and gold.
Global equities have rebounded from a one-month low since Thursday as bookmakers’ odds indicated a growing probability the UK will stay in the EU following this week’s referendum. A YouGov/Times poll published late on Monday showed "Leave" at 44% and 42% for "Remain", while an ORB/Daily Telegraph survey had "Remain" at 53% and "Leave" at 46%.
In the US, Yellen will testify before lawmakers on Tuesday and on Wednesday as she delivers a semiannual report.
“Yellen may stress concerns over the economy, which will put downward pressure on the dollar," said Toshihiko Matsuno, chief strategist at SMBC Friend Securities in Tokyo. “There’s still some time until the UK referendum and there’s a chance that public opinion, which had leaned towards Remain, may change.”
The UK’s referendum was cited as a factor in the Fed’s decision to leave interest rates unchanged at a policy meeting last week, when the central bank expressed concern about US jobs growth and reined in its projections for interest-rate increases over the next two years. Futures show the chances of borrowing costs being raised by September have about halved to 30% since the start of this month.
European Central Bank President Mario Draghi will be speaking on Tuesday in Brussels, while monetary authorities in Turkey, Morocco and Hungary have policy reviews scheduled. A gauge of German investors’ confidence is also due along with a report on UK factory orders. Adobe Systems and FedEx are among companies announcing earnings.
Stocks
Futures on the Euro Stoxx 50 Index gained 0.1% as of 08:07, while those on the FTSE 100 slid 0.3% and contracts on the S&P 500 advanced 0.4%.
The MSCI Asia Pacific Index rose 0.8%, after a 1.9% surge on Monday that marked its biggest jump in three months. Japan’s Topix climbed 1.2% as benchmarks in Hong Kong and Taiwan added 0.7%.
Currencies
The yen weakened 0.4%, after surging 3% over the last seven trading sessions, as a technical indicator - the relative strength index - reached a level that indicated a reversal was likely. Finance Minister Taro Aso signaled that Japan’s government won’t intervene to stem the yen’s strength without due consideration
“The RSI indicator is suggesting dollar-yen is oversold at current levels,” said Khoon Goh, a senior foreign-exchange strategist at Australia & New Zealand Banking Group in Singapore. Even then, the yen remains resilient “due to the dollar staying weak, and markets seeing little chance of FX intervention by Japan.”
The pound was little changed against the greenback, after surging 3.5% over the last two trading sessions. Billionaire investor George Soros said sterling may slump more than 20% if British voters choose to leave the EU, a devaluation that would be bigger and more disruptive than when he profited by betting against the currency in 1992.
“There’s quite a lot of volatility in the pound now with investors repositioning after the massive rally,” said Angus Nicholson, a market analyst at IG in Melbourne. “There is a lot of uncertainty with the Brexit vote and Remain is not a given yet.”
The Bloomberg Dollar Spot Index declined 0.1%, falling to its lowest in more than a month. Futures show the odds of a US interest-rate increase this year have dropped to 46% from 74% since the start of June.
Australia’s dollar rose 0.3%, strengthening for a third day. The central bank hailed recent positive economic data while reiterating inflation would remain low, in minutes of its June meeting where interest rates were left at 1.75% and no policy guidance was provided.
Commodities
West Texas Intermediate crude dropped as much as 0.9% to $48.91 a barrel in New York, after rallying 6.8% in the last two sessions. US inventories probably fell by 1.5 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report on Wednesday.
Gold for immediate delivery declined 0.4%, extending Monday’s retreat from its highest close since January 2015. Copper lost 0.7% in London, while nickel dropped 1% after ending the last session at a six-week high.
Bonds
US Treasuries due in a decade advanced for the first time in four days, pushing their yield down by three basis points to 1.66%. The rate jumped eight basis points on Monday, the biggest increase in a month.
“The Treasury market remains at the mercy of event risk,” primarily the UK referendum Thursday, JPMorgan Chase analysts, including New York-based Jay Barry, wrote in a client note. In reaction to Yellen’s testimony, “we expect more muted yield moves, particularly given the market’s focus on global geopolitics,” according to the note.
