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Sydney - The dollar declined with Treasury yields amid uncertainty about the prospects of US tax cuts and as investors digested news that President Donald Trump will pick Jerome Powell to lead the Federal Reserve.
A rally in Asian stocks that drove prices to the highest level in ten years showed signs of tiring as US equity-index futures slipped. Powell, a governor on the Fed board who’s never differed with Chair Janet Yellen on policy decisions, will be nominated by Trump to succeed her, according to three people familiar with the decision.
Investors remain focused on the progress toward American tax reform, corporate earnings and Friday’s US jobs report. There have been conflicting reports when and how the US tax rate on companies would be lowered.
In Japan, a boost to Honda Motor’s profit outlook lifted its shares and helped other transportation stocks drive the Topix index to the highest level since 2007. Still, gains were muted as the yen jumped along with other G10 currencies. Oil prices hovered near their peak for the year.
Trump has said he’ll announce his Fed pick on Thursday. Powell will inherit a central bank that anticipates eventually reaching its 2% inflation target, given a strengthening labour market and solid economic activity.
The succession question overshadowed the Fed’s policy statement on Wednesday, where it subtly upgraded its assessment of the economy and reinforced expectations of a December interest-rate hike.
Meantime, anything other than a rate hike from the Bank of England on Thursday would be a surprise to markets. Governor Mark Carney may signal even more tightening if the economy performs in line with new forecasts, but that’s unlikely, according to Bloomberg Intelligence.
Officials will probably lift the growth outlook for 2018 and lower it for 2019. Inflation forecasts may be raised for this year and left unchanged for next.
Here are some of the remaining scheduled events this week:
Trump starts an 11-day trip to Asia, his first as president, on Friday. Trade and security issues - particularly North Korea - will probably be in focus. The slew of earnings releases will culminate with Apple results.
And these are the main moves in markets:
Stocks
Japan’s Topix was up 0.2% as of 2:17pm in Tokyo, while the Nikkei 225 Stock Average is roughly 1% from its highest level since 1992. Australia’s S&P/ASX 200 Index dipped 0.1% and South Korea’s Kospi index lost 0.4%, while Hong Kong’s Hang Seng Index was down 0.1%.
The Shanghai Composite Index declined 0.5% Futures on the S&P 500 were down 0.2%. The underlying gauge rose 0.2% on Wednesday.
Currencies
The Bloomberg Dollar Spot Index declined 0.3%. The yen advanced 0.2% to 113.91 per dollar after decreasing 0.5% on Wednesday to near the weakest level since July.
The euro was up 0.3% at $1.1657. Australia’s dollar climbed 0.5% to 77.18 US cents, and the Kiwi rose 0.6% to 69.30 cents.
Bonds
The yield on 10-year Treasuries fell more than 1 basis point to 2.36%. Australia’s 10-year yield declined about 6 basis points to 2.65%.
Commodities
West Texas Intermediate crude was flat at $54.30 a barrel. Gold was up 0.4% at $1 279.19 an ounce. The Bloomberg Commodity Index rose 0.1%, up for a fourth day, to the highest level since March.
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