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Asian stocks drop as yen gains, Aussie dollar slips

Apr 04 2017 09:01
Bloomberg: Adam Haigh

Sydney - Asian stocks slipped, taking their cue from a weaker US equities session, as a rising yen weighed on shares in Tokyo. The Australian dollar dropped after the nation’s central bank left rates unchanged.

The yen climbed against the dollar for a third day. Tokyo shares were also led lower as auto manufacturers reported worse-than-expected US sales for March.

China, Hong Kong, Taiwan and India are closed for a holiday. The Aussie fell for a fourth day while government bonds climbed. South Africa’s rand extended declines for a seventh day after the country lost its investment-grade credit rating from S&P Global Ratings for the first time in 17 years.

Investors are taking stock ahead of a key US payrolls report on Friday and minutes from the Federal Reserve’s latest meeting on Wednesday.

Global stocks last week completed the best quarter since 2013 as the reflation trade triggered by Donald Trump’s US election victory shows resilience and stronger global growth underpinned gains. Nonetheless, risks remain, from prospects over implementation of the president’s pro-growth agenda and the path of higher US interest rates.

Institute for Supply Management data showed US factories continued to expand production at a robust pace in March, reaffirming faith in the global economic recovery.

However, worse-than-forecast monthly auto sales offered a warning that Americans may have become more thrifty. Veteran money manager Bob Doll at Nuveen Asset Management is becoming increasingly worried that the American economy poses a greater threat to the US stock rally than the political tensions traders are currently focused on.

What investors will be watching this week:

Fed speakers include William Dudley, president of the New York Fed, and Governor Daniel Tarullo. Minutes from the March meeting, which are scheduled to be released April 5, should put their recent public comments into perspective. Minutes are also due from the European Central Bank’s latest gathering.

China’s President Xi Jinping will meet US President Donald Trump for two days starting April 6. US non-farm payrolls are due April 7.

Here are the main moves in markets:

Currencies

The yen rose 0.4% to ¥110.47/$ as of 08:31, after climbing 0.5% in each of the previous two sessions. The Bloomberg Dollar Spot Index added 0.1%. The Aussie dollar fell 0.5%, bringing its four-day decline to 1.3%.

Australia kept interest rates unchanged, remaining in a form of policy paralysis as housing is too hot to allow an easing and the economy too weak to absorb a tightening.

The Russian rouble fluctuated between gains and losses after a subway bombing in St. Petersburg killed 11 people and injured dozens more. The rand dropped 1.4%. The currency has tumbled 12% over the past seven days amid a cabinet purge by President Jacob Zuma that’s sparked increasing calls for him to resign.

Stocks

The Topix index lost 0.8%, with Honda, Mazda and Nissan dropping more than 2.5%. Australia’s S&P/ASX 200 Index and South Korea’s Kospi each slid 0.3%. The Philippines benchmark index jumped 1.4% to the highest level since October, while Indonesian shares rallied 0.7% to extend a record. Futures on the S&P 500 lost 0.2%.

The underlying gauge slid 0.2% on Monday and the Stoxx Europe 600 Index declined 0.5%.

Bonds

The yield on 10-year Treasuries rose one basis point to 2.33%, after declining seven basis points on Monday.  Australia’s 10-year yield fell seven basis points to 2.61%.

Commodities

Oil slipped 0.4% to $50.05 per barrel, after dropping 0.7% on Monday as a rally above $50 runs out of steam. Gold rose 0.3% to $1 256.59, advancing for a third day amid speculation the Fed may go slower on rate hikes after the worse-than-expected US auto sales for March.

Read Fin24's top stories trending on Twitter:

equities  |  markets  |  asian markets
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