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Hong Kong - Emerging-market stocks retreated from near a one-year high and oil fell for the first time in a week after hawkish comments from Federal Reserve officials helped revive the dollar. European equity index futures were little changed.
Industrial shares led losses on MSCI’s gauge of developing-nation shares, which snapped an eight-day winning streak on Tuesday, and crude pulled back from a five-week high.
Japanese stocks rose for the first time this week as the yen fell.
The Bloomberg Dollar Spot Index rebounded from near a three-month low after two regional Fed chiefs indicated interest rates could be increased at least once this year. US Treasuries held losses before minutes from the Fed’s July meeting are published.
Global equities this week climbed to a one-year high and the dollar index sank to levels last seen in May as conflicting signals over the US labour market and growth cast doubt over the Fed’s plans to tighten monetary policy. With traders pricing in basically even odds of a rate increase by December, New York Fed President William Dudley said on Tuesday markets were "too complacent" on the outlook and borrowing costs could be boosted as soon as next month.
Atlanta Fed chief Dennis Lockhart also chimed in, saying he’s confident growth is accelerating enough for at least one hike in 2016.
"Comments from Dudley certainly knocked the wind off the market rally," said Matthew Sherwood, head of investment strategy at Perpetual in Sydney, which manages about $21bn. "The market has had a tremendous rally and is probably due for a pullback."
St. Louis Fed chief James Bullard is due to speak on Wednesday and the minutes of the US central bank’s last policy meeting are scheduled for release at 2 p.m. in Washington.
Tyco International and Johnson Controls have shareholder meetings lined up to vote on their proposed $16bn merger, while Target and Cisco Systems are among US companies reporting results.
Stocks
The MSCI Emerging Markets Index was down 0.5% as of 7:09 a.m. London time, trimming this quarter’s advance to about 9%.
"The Fed comments reverse the feel-good feeling to a certain extent," said Geoffrey Ng, who oversees $260m as an investment adviser at Fortress Capital Asset Management in Kuala Lumpur.
"It’s not surprising to see markets pulling back after a fairly good run post-Brexit."
Japan’s Topix index rallied 1%, while benchmarks declined in Malaysia and South Korea. The Hang Seng Index and the Shenzhen Composite each advanced less than 0.5% after an exchange trading link between Hong Kong and Shenzhen was unveiled.
The link may start in about four months, according to details announced late on Tuesday.
Indonesia’s financial markets were shut for a holiday.
BHP Billiton gained as much as 3.4% in Sydney after reporting a record full-year loss and saying it’s emerging from the worst commodities price collapse in a generation.
Cathay Pacific Airways plunged as much as 7.8% in Hong Kong after first-half net income tumbled 82% and missed analysts’ estimates.
Futures on the S&P 500 Index rose 0.1%, after the benchmark slipped 0.6% from a record high in the last session. Contracts on the Euro Stoxx 50 Index were down less than 0.1%.
ABN Amro Group announced a 35% drop in quarterly profit and Carlsberg reported first-half net income that fell short of analysts’ estimates.
Currencies
The Bloomberg Dollar Spot Index rose 0.3%, after sliding 1% over the last three days. Dudley and Lockhart’s comments helped push the probability of a Fed rate hike above 50% in the futures market for the first time since June 23, when the UK voted to leave the European Union.
"While Dudley was at least able to stem the bleeding for the dollar index, price action is not encouraging for the dollar near term," said Sean Callow, a senior foreign-exchange strategist at Westpac Banking Corporation in Sydney.
"Still, so long as a rate hike seems more likely than not as the Fed’s next move, we wouldn’t get super bearish on the dollar."
The yen was down 0.7% at 101.01 per dollar, after strengthening beyond 100 on Tuesday for only the second time this year.
The currency is still up 19% for the year and Japanese vice Finance Minister Masatsugu Asakawa said policy makers are prepared to intervene if exchange-rate moves are extreme. South Korea’s won slid 1.3%, retreating from near a one-year high.
Commodities
Crude oil fell 0.4% to $46.40 a barrel in New York as weekly industry data showed US gasoline stockpiles expanded, keeping supplies at the highest seasonal level in more than two decades.
It surged 12% over the last four days, the steepest rally since April, after Saudi Arabia indicated it was prepared to act to help stabilize prices after oil sank into a bear market earlier this month.
Nickel rebounded from the lowest level in five weeks as the Philippine Chamber of Mines called on companies to comply with environmental standards ordered by the government, a move that may deepen production cuts in the world’s largest supplier. Copper declined 0.1% in London, while tin lost 0.8%.
Bonds
The yield on US Treasuries due in a decade was little changed at 1.57%, after climbing six basis points over the last two days.
A JPMorgan Chase survey showed Treasury investors held the most net long positions since June 20 in the week ended August 15.
"Benchmark 10-year yields around 1.5% show the market isn’t concerned about higher rates, and Dudley doesn’t want that situation," said Kazuaki Oh’E, the head of fixed income at CIBC World Markets Japan in Tokyo.
"The Fed wants to prepare the market for the next hike."
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