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Sydney - Asian and European stocks followed US shares lower while the dollar was steady after its longest winning streak since May, as Janet Yellen prepared to weigh in on the path for interest rates.
European stocks pared a weekly gain, while equities in Japan declined after three days of gains. South Korean stocks tumbled with the won on reports that China will curb tourism to the country.
The yen strengthened, after four days of losses amid increasing confidence that the Federal Reserve will raise rates this month. The 10-year Treasury yield was flat after climbing for the past four days and gold edged lower.
The dollar’s recent advance and declines in gold and Treasuries lined up with increasing odds for tighter monetary policy. Rallies in equities and commodities predicated on stronger economic growth failed to keep pace even as reports showed a pickup in European inflation and a tighter US jobs market. A report from Japan showed a gauge of consumer prices rose for the first time since December 2015.
“The markets are in the short-term overextended,” said Mark Matthews, Singapore-based head of Asia research at Bank of Julius Baer. “Longer term, the reason why rates are going up is because the economy is getting better, and that’s good for stocks.”
Upcoming events that traders are looking out for:
Yellen gives an address on the economic outlook on Friday in Chicago after her deputy Stanley Fischer speaks in New York. Fed officials have been weighing in all week, with Lael Brainard the latest to support the case for tightening “soon.”
The Chinese People’s Political Consultative Conference, an advisory body of more than 2 000 political elites, business executives and others, opens its annual session in Beijing on March 3.
Here are the main moves in markets:
Currencies
The yen rose 0.1% to ¥114.29/$ as of 10:19. The currency is still down 1.9% this week, its biggest decline this year. The Bloomberg Dollar Spot Index was little changed after a five-day rally. The euro rose 0.1% to $1.0516. The Korean won dropped 1.3%, to the lowest since February 1. The kiwi and the Canadian dollar each lost at least 2% this week.
Stocks
The MSCI Asia Pacific Index headed for its largest drop since mid-December. The Stoxx Europe 600 slipped 0.4%, paring its weekly gain to 1.2%. The Topix lost 0.4%, after closing at the highest level since December 2015 on Thursday.
Australia’s S&P/ASX 200 Index slid 0.8%, after the biggest surge since November in the previous session. The Kospi was down 1.1%, the most since November, as Korean newspapers reported that China ordered travel agencies to stop selling travel packages into the country.
The Hang Seng Index slid 0.7% and a measure of Chinese shares in Hong Kong dropped 1%, the most since January 16. Futures on the S&P 500 Index fell 0.3%. The benchmark gauge lost 0.6% on Thursday, after briefly climbing above 2 400 for the first time during the previous session.
Bonds
Yields on 10-year Treasuries were little changed at 2.48%. The two-year yield, the coupon most sensitive to Fed actions, touched 1.336% on Thursday, the highest since 2009.
Commodities
Gold slipped 0.6% to $1 226.25 an ounce. It’s down 2.4%for the week, after four straight weeks of advances. Oil rose 0.4% to $52.83 a barrel, halting a three-day slide. Copper was little changed, after Thursday’s 1.4% drop. Iron ore fell 2.9%.
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