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Yen gains on Korea tensions while Asia stocks rise

Mar 06 2017 09:34
Bloomberg: Adam Haigh and Yuko Takeo

Sydney - Escalating geopolitical tensions sparked a rise in the yen, while most Asian equities advanced as investors assessed statements from China’s National People’s Congress and Federal Reserve Chair Janet Yellen.

The Topix and US stock futures were lower as Japan moved to the highest possible alert level after North Korea fired four ballistic missiles into nearby waters.

Equities were mostly higher elsewhere, with shares in Hong Kong and Shanghai advancing.

The 10-year US Treasury yield was steady after gaining for five straight days. Gold retreated with oil.

The latest provocation from Kim Jong Un’s regime comes as South Korea and the US undertake annual military drills that Pyongyang has called a prelude to an invasion.

Tensions have been rising over North Korea, which also conducted a missile test during Abe’s state visit to the US last month and is suspected of being behind the assassination of its leader’s half-brother in Malaysia.

"The yen seems to be strengthening on the North Korean missile launch," said Soichiro Monji, general manager of the economic research department at Daiwa SB Investments.  

"Unless there are further moves I doubt markets will react to this longer than a day, but the situation in North Korea seems to be getting tenser. It’s difficult for investors to trade."

Chinese small-cap stocks and power companies were the biggest beneficiaries from the ongoing annual legislative meetings in Beijing.

Premier Li Keqiang set a 2017 growth target of "around 6.5%, or higher if possible" in a report to the NPC that reiterated the pursuit of neutral monetary policy this year.

As for US monetary policy, Yellen joined a chorus of Fed officials who have suggested growth remains on track to warrant higher interest rates as early as next week’s central bank meeting.

Fixed-income markets indicate a greater than 80% chance of a hike in March, with a monthly jobs report on Friday and a read on inflation the day of the decision looming as slight risks.

What’s ahead for the markets:

Central banks in Europe and Australia will come into focus this week as the Fed now goes into a quiet period before its decision. US jobs data for February are on tap for Friday.

Employers probably added around 190 000 workers to payrolls, in line with the average over the past six months and a sign of steady job growth, economists forecast.

European automakers gather this week at the Geneva Motor Show.

Here are the main moves in markets:

Currencies

The yen rose 0.2% to 113.82 per dollar as of 3:32 in Tokyo. The South Korean won fell 0.1%. The Bloomberg Dollar Spot Index climbed 0.1%, after slipping 0.7% on Friday to halt a five-day rally.

Stocks

The MSCI Asia Pacific Index advanced 0.3%. India’s Sensex climbed 0.6%, to trade near the highest level since September. The Kospi rose 0.3%, erasing an earlier loss of 0.5% as Samsung Electronics jumped 1.3%.

The Topix retreated 0.2%, after sliding 0.5% earlier. Futures on the S&P 500 declined 0.3%.

The benchmark index gained less than 0.1% on Friday to end higher for a sixth straight week. Hong Kong’s Hang Seng added 0.2% while the Shanghai Composite Index increased 0.3%.

Bonds

Yields on 10-year Treasuries fell less than one basis point to 2.47%, while those for Australian government bonds were little changed at 2.80%.  

Commodities

Gold fell 0.2% to $1 232.91 an ounce. The metal had its worst performance of the year last week, falling 1.8%.

Crude slipped 0.5% to $53.05 a barrel. Futures jumped 1.4% on Friday after a three-day drop. Copper lost 0.3%, erasing an earlier gain.

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