Stocks advance after US record, havens retreat

Sydney - Global stocks advanced following a record-breaking Wall Street session, while the yen and safe haven assets retreated amid optimism the US will pursue a peaceful resolution to North Korea’s nuclear threats.

European stocks and US futures rose with equities in Australia and Hong Kong, while South Korea’s Kospi index jumped the most since May. Japanese markets were closed for a holiday.

The S&P 500 climbed above 2 500 for the first time on Friday and the Dow Jones Industrial Average chalked another record close as investors shrugged off the latest North Korean missile test. The dollar was steady after declining on Friday when US retail sales raised concerns about the strength of the economy.

“With the latest missile test we really didn’t see much of a market footprint at all,”  Todd Elmer, Singapore-based head of Group-of-10 FX strategy for Asia ex-Japan at Citigroup, told Bloomberg Television. “What that signals is that investors are not inclined to extrapolate that provocation into any major flareup in geopolitical tension.”

With weaker readings also on factory output and consumer confidence in August, the focus now turns to the US Federal Reserve meeting this week, where officials are expected to announce the start of the reduction of the central bank’s $4.5trn balance sheet, while keeping the benchmark rate unchanged.

Investors will be tuning in to a fresh round of speeches by Fed chair Janet Yellen and regional Fed presidents for clues on the central bank’s next moves as the outlook for the US economy has been clouded by Hurricane Harvey. The Bank of Japan is also expected to stand pat when it meets to discuss its policy later in the week.

The US seeks a peaceful resolution but is prepared to use military force if diplomatic efforts fail to end the nuclear standoff with North Korea, Secretary of State Rex Tillerson told CBS. The comments were made ahead of US President Donald Trump’s first address before the United Nations on Tuesday as foreign leaders gather in New York to discuss how to deter North Korea from enhancing its nuclear capability.

Meanwhile, Japanese Prime Minister Shinzo Abe is weighing holding a snap general election as early as next month amid growing support for his handling of the North Korea crisis, according to public broadcaster NHK.

What to watch out for this week: 

• US home construction and sales of previously owned properties are the highlights of the week’s US economic calendar.

• Indonesia and the Philippines are among countries settling monetary policy.

• The Reserve Bank of Australia releases minutes of its September board meeting on Tuesday.

• The People’s Bank of China releases its net foreign exchange position data for August.

• Japan trade and Malaysia CPI are also due.

• Campaigning continues in Germany, days before the September 24 election, as Chancellor Angela Merkel and challenger Martin Schulz both make their final pitches to voters.

• New Zealand also goes to the polls on September 23. Japan markets are shut for respect-for-the-aged day.

Here are the main moves in markets:

Stocks

• The Stoxx Europe 600 Index increased 0.4% as of 8:01am New York time, the highest in almost six weeks.

• The MSCI All-Country World Index advanced 0.2% to the highest on record.

• Futures on the S&P 500 Index climbed 0.3% to the highest on record.

• The MSCI Emerging Market Index gained 1% to the highest in more than six years on the biggest rise in five weeks.

Currencies

• The Bloomberg Dollar Spot Index climbed less than 0.05%.

• The euro advanced less than 0.05% to $1.1948.

• The British pound dipped 0.1% to $1.3586.

• The Japanese yen declined 0.5% to ¥111.38/$, the weakest in almost eight weeks.

Bonds

• The yield on 10-year Treasuries advanced one basis point to 2.21%, the highest in almost four weeks.

• Germany’s 10-year yield gained one basis point to 0.45%, the highest in almost six weeks on the biggest gain on record.

Commodities

• Gold dipped 0.4% to $1 315.21 an ounce, the weakest in almost three weeks.

• West Texas Intermediate crude advanced 0.2% to $49.98 a barrel, reaching the highest in seven weeks on its sixth consecutive advance.

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