Asian stocks swing, yuan drops after trade miss

Sydney - Asian stocks fluctuated on Thursday as investors continued to assess the implications of the recent market turmoil that has elevated volatility. The yuan dropped the most since August 2015 after trade figures missed estimates and amid speculation policy makers will step up efforts to rein in gains.

Shares in Japan closed higher and the yen weakened. China’s stocks fell for a third day, while Hong Kong shares climbed. S&P 500 Index futures were up after paring an earlier loss. US 10-year yields fluctuated after gains resulting from weak demand at a bond sale on Wednesday that had pushed the yield back toward the recent four-year high.

The dollar slipped and the euro and pound gained.

"There are a lot of risks ahead and we’ve been lulled into a false sense of security over the last couple of years with central banks keeping rates low for a very long time," Steve Goldman, Kapstream Capital head and portfolio manager, said on Bloomberg TV.

"Risk assets are going to continue to perform well albeit with a lot more volatility than what we’ve seen in the past."

Concerns that the Federal Reserve could accelerate its tightening schedule this year has triggered a surge in government bond yields. Chicago Fed President Charles Evans said Wednesday sustained inflation could force more hikes. For equity bulls, a lingering issue is the wisdom of doing what they always do - buy the dip - when more selling by speculators may be imminent after Monday’s break in volatility markets.

Accounts of losses and liquidations at hedge funds specializing in the asset class were rife Wednesday morning even as Wall Street strategists urged investors to consider the market’s solid underpinning in economic growth and earnings.

For more on this week’s market turmoil:

How Does the World End? Stock Markets After a Psychological Peak Good Is Bad, Bad Is Good and Trump Is Miffed at Stock Traders End of a Bull Market, or Nowhere Near? Making the Case for Both Credit Suisse Fund Liquidated, ETFs Halted as Short-Vol Bets Die.

The yuan fell the most since the currency’s devaluation in August 2015 after China reported a much narrower than expected trade surplus as imports jumped.

The country has resumed its Qualified Domestic Limited Partnership plan after a two-year halt, granting licenses to about a dozen global money managers that can raise funds in China for overseas investments, Reuters reported on Thursday, citing people it didn’t identify.

Elsewhere, the New Zealand dollar fell after the central bank delayed the timing for when it expects to reach it’s inflation target and cut its growth forecast.

Oil was mixed after a report showing record crude production from US fields. Gold dropped to a four-week low.

Here are some events scheduled for the remainder of this week:

The UK’s monetary policy decision Thursday. The Bank of England may see Governor Mark Carney emphasize that continuing appreciation of the pound, which has strengthened almost 3% since the beginning of 2018, would help to contain inflation.

This would stand in sharp contrast to the Reserve Bank of New Zealand which earlier on Thursday said it expects its exchange rate to ease. Earnings season continues with reports from Philip Morris, L’Oreal and Twitter.

These are the main moves in markets:

Stocks

The MSCI Asia Pacific Index jumped 0.4% as of 4:28pm Tokyo time. Topix index rose 0.9%. Hong Kong’s Hang Seng Index rose 0.3%. Kospi index jumped 0.5%. Australia’s S&P/ASX 200 Index rose 0.2%. Futures on the S&P 500 Index rose 0.1%.

Currencies

The Bloomberg Dollar Spot Index fell 0.1%. The Japanese yen fell 0.3% to 109.61 per dollar. The euro gained 0.2% to $1.2288.

Bonds

The yield on 10-year Treasuries fell less than one basis point to 2.83%. Japan’s 10-year yield rose one basis point to 0.082%.

Commodities

West Texas Intermediate crude fell less than 0.05% to $61.77 a barrel. Gold fell 0.4% to $1 313.55 an ounce. LME copper rose 0.3% to $6 898.50 per metric tonne.