Global stocks drop on final day of stellar quarter

Tokyo - Global stocks were poised to end a blockbuster quarter with a whimper, with investors seeing little reason to take shares higher amid political and economic uncertainty in the coming quarter.

Japan’s Topix became one of the few gauges in Asia posting a loss this quarter, held back by the strength of the yen and wiping out a rally on Friday despite positive economic data.

South Africa’s rand headed toward its worst week since 2015, in the wake of the ouster of a proponent of fiscal discipline as finance minister.

China’s short-term money-market rates climbed across the board, with the one-week cost rising to the most expensive level in almost two years.

"There’s a strong sense of political uncertainty going forward in both the US and Europe," said Masaru Hamasaki, head of the investment information department at Amundi Japan.

"In the US, the repeal of the Obamacare replacement bill has continued to create confusion.

In Europe, we’ve only just had the UK trigger Article 50. We’ve already essentially entered the new fiscal year, and its difficult to keep buying when you look to the future."

Global stocks are heading toward 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 to fallout from the UK’s exit from the European Union.

Federal Reserve officials shifted to a more hawkish tone on interest rates, as the world’s biggest economy progresses toward goals for full employment and 2% inflation.

The European Central Bank could scale back its quantitative easing program in a five-month period, Governing Council member Klaas Knot said, according to Dutch paper Het Financieele Dagblad.

Concerns about trade protectionism also loom over the markets. China expressed optimism about Xi Jinping’s first meeting with Trump, despite the US president’s predictions of a "very difficult" discussion when the leaders of the two biggest economies sit down next week.

"The market continues to be devoid of a clear direction," says Yoshihiro Okumura, general manager at Chibagin Asset Management in Tokyo.  

'Its up one day, down the other on overseas factors. Economic data, hopes over corporate earnings is a plus but politics remains a minus factor, which will likely be the case for the new quarter."
What investors are watching:

A hefty dose of economic data awaits traders Friday, following the morning releases from China and Japan. For Europe, there’s a final reading on UK fourth-quarter GDP, and CPI for the euro-zone. Then the US weighs in with personal income and spending.

Here are the main moves in markets:

Stocks

The MSCI All-Country World Index slumped 0.4% as of 8:35 in London, paring a quarterly gain to 6.5%. The MSCI Asia Pacific Index fell 0.9%. The regional gauge is up 8.7% for the three months, its best showing since March 2012.

The Stoxx Europe 600 fell 0.2%, trimming a quarterly advance to 5%.

Japan’s Topix fell 1%, after gaining as much as 0.8% earlier. Core consumer prices rose slightly for a second month in February, while separate data showed industrial production grew more than expected during the month.

The Shanghai Composite Index added 0.4%. China’s official factory gauge climbed to the highest in almost five years, the latest evidence of gathering momentum in the world’s second-largest economy.

Hong Kong’s Hang Seng fell 0.7% and the Hang Seng China Enterprises Index lost 0.8%. Both measures are up more than 9% for the quarter. Futures on the S&P 500 dropped 0.2%. The underlying index climbed 0.3% on Thursday.  

Currencies

The rand plunged as much as 2.6% before paring losses. The currency is down more than 7% for the week. South African President Jacob Zuma fired Finance Minister Pravin Gordhan and replaced him with Home Affairs Minister Malusi Gigaba as he sought to tighten his grip over the nation’s finances.

The yen rose 0.1% to 111.86 per dollar, after declining 0.8% on Thursday. The currency has jumped 4.6% for the quarter.

The Bloomberg Dollar Spot Index was little changed, giving it a 3.4% drop for the three months.
The euro rose 0.2% to $1.0691 after tumbling 0.9% on Thursday to cap a three-day loss.

Bonds

Yields on 10-year Treasuries were little changed at 2.42%, after climbing four basis points on Thursday. The rate has alternated between gains and losses throughout the week.

China’s seven-day repurchase rate jumped 32 basis points to 3.14%, the highest level since April 7, 2015.

The 14-day cost added 11 basis points to 4.86%, extending its advance after reaching the highest level since March 2015 on Thursday.

Commodities

Crude was flat at $50.33. Kuwait and other countries support prolonging production cuts that are scheduled to expire in June, the Persian Gulf emirate’s Oil Minister Issam Almarzooq told state-run news agency KUNA.

Gold was flat at $1 242.33 an ounce, after tumbling 0.9% on Thursday. The precious metal is up 8.3% for the quarter.