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Hong Kong - European stock index futures declined with Asia’s emerging-market stocks and currencies as the prospect of monetary policies turning less accommodative in the world’s biggest economies dented investor confidence.
The MSCI Emerging Markets Index declined for the first time this week after Bloomberg News reported that an informal consensus was building in the European Central Bank to rein in quantitative easing and Federal Reserve officials talked up the chance of a US interest-rate increase in 2016.
Exporters led gains in Japanese stocks following the yen’s biggest drop since August, while New Zealand’s dollar sank to a seven-week low after global dairy prices fell.
Oil rallied as data indicated American stockpiles shrank last week.
Funds poured into financial assets in the developing world this year as loose monetary policies in the world’s biggest economies spurred demand for higher-yielding investments.
That’s left emerging markets vulnerable to a selloff as central banks in Europe and Japan show signs of wanting to dial back their unprecedented stimulus and the case for a US interest-rate increase builds.
Fed Bank of Chicago President Charles Evans said on Wednesday that borrowing costs could be raised as early as November and his counterparts for Richmond and Cleveland spoke over the last two days in favour of a hike.
"Equity markets are retreating following hawkish comments from Fed officials and talks the ECB may curb stimulus," said Margaret Yang, an analyst at CMC Markets in Singapore.
"There are uncertainties remaining. We will see a pickup in volatility ahead of the US elections."
Stocks
Futures on the Euro Stoxx 50 Index were down 0.9% as of 7:19 London time, while S&P 500 Index contracts declined 0.1% after the US benchmark slipped to a one-week low in the last session. Gauges of services output for the euro area, UK and US are due on Wednesday.
The MSCI Emerging Markets Index fell 0.3%, retreating from a one-week high. Japanese exporters helped drive a third day of gains in the Topix index, which closed above its 200-day moving average for the first time this year.
Hong Kong’s Hang Seng Index added 0.4%, led by oil companies.
"Prolonged stimulus from global central banks has allowed Hong Kong stocks to recoup lost ground," said Ronald Wan, chief executive of Partners Capital International in Hong Kong. "Once the central banks start to taper, it means liquidity will dry up and interest rates will go higher."
Hitachi Koki Company urged the most in more than seven years in Tokyo after Hitachi was said to be exploring a sale of its stake in the maker of power tools. Hitachi jumped 6.4%, its biggest gain since February.
China Oilfield Services climbed to a 10-month high in Hong Kong after Nomura Holdings raised its rating on the stock to buy. Newcrest Mining, Australia’s biggest gold producer, fell 5.1% in Sydney after bullion dropped by the most in a year on Tuesday.
Currencies
The Bloomberg Dollar Spot Index fell 0.1%, after gaining 0.6% in the last session. The yen was little changed following a 1.2% drop versus the greenback on Tuesday.
"The dollar is being supported by improved economic data releases, such as manufacturing and higher consumer confidence ahead of an expected Fed hike in December," said Jason Wong, a currency strategist at Bank of New Zealand in Wellington.
"We think the dollar has more upside potential over the next 6-12 months with higher interest rates and inflation the key drivers and the elections the main risk factor."
The kiwi weakened for a third straight day, declining 0.4%. Average prices for whole milk powder, New Zealand’s chief farm export, fell 3.8% at the GlobalDairyTrade auction on Tuesday.
The pound slipped to a fresh three-decade low of $1.2711. It’s tumbled against its entire major counterparts this week after British Prime Minister Theresa May signalled the UK is prepared to surrender membership of Europe’s single market in its planned exit from the European Union.
May is due to speak again on Wednesday at the conclusion of her Conservative Party’s annual conference.
Bonds
New Zealand government debt led declines in Asia, with yields on notes due in a decade rising seven basis points to 2.49%. The rate on similar-maturity bonds in Germany was set for its highest close in two weeks.
The yield on 10-year US Treasuries fell one basis point to 1.67%, after climbing six basis points on Tuesday. JPMorgan Chase & Company said the rate could climb as high as 2% this year, joining Goldman Sachs Group in predicting a level unseen since March.
Richmond Fed chief Jeffrey Lacker may argue for the second time this week in favour of an interest-rate rise when he speaks Wednesday, though futures indicate only a 21% chance of a move coming when the next meeting concludes on November 2, less than a week before a US presidential election.
"One thing they would want to avoid is seeming political by hiking so close ahead of the US election," said Michael Pond, head of global inflation market strategy in New York at Barclays.
The UK lender has pushed back its call for the next rate increase to December after its projection for a move in September proved wrong.
Commodities
Crude oil rose as much as 1.3% to $49.30 a barrel in New York. Inventories dropped by 7.6 million barrels last week, the American Petroleum Institute was said to report, ahead of official data on Wednesday that’s forecast to show stockpiles increased.
A deal between major producers could trim output by 1.2 million barrels a day and boost prices by as much as $15 a barrel, according to Venezuela’s oil minister.
Gold for immediate delivery rose 0.3%, after a 3.3% plunge in the last session took it below $1 300 an ounce for the first time since June. Industrial metals declined in London, with copper, nickel and lead declining for a third day.
"It does appear that the market is a bit jittery over prospects for a global exit from central bank stimulus," said Ric Spooner, a chief market analyst at CMC Markets in Sydney.
"For metals there’s a concern that the main impact would be a stronger dollar" as most commodities are priced in the currency, he said.
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