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Tokyo - Asia’s blazing stock rally took a pause on Wednesday as investors took stock of the best start to a year for the region since 2006. A strengthening yen hit Japanese shares, although a record winning streak for Chinese stocks in Hong Kong resumed after an early dip.
The MSCI Asia Pacific Index slipped, with a rise in Australian stocks offset by declines in Tokyo. South Korean shares were little changed. The dollar dropped for a third day as traders increasingly cite concerns about a widening US trade deficit that’s been highlighted by President Donald Trump’s protectionist moves.
The yen bore much of the load of the US currency’s weakness, pushing past ¥110/$ for the first time since September.
"We’re looking for the dollar to continue to depreciate against most currencies," Daniel Morris, a senior investment strategist with BNP Paribas Asset Management, said in an interview with Bloomberg Television. "The US economy has a current-account deficit and it needs to close that - one way to do that is for the dollar to depreciate."
Futures on the US S&P 500 Index were little changed after the underlying gauge closed at a record high, bolstered by a strong start to the earnings season, with 82% of firms that have reported topping estimates. The 10-year Treasury yield steadied after a second session of declines.
Traders will be turning their attention toward Thursday’s European Central Bank meeting, as well as keeping an eye on Davos, Switzerland, where the world’s business and political elites have gathered for an annual conference that will feature the leaders of the US, UK and Germany among others.
Meanwhile, oil in New York held near the highest since December 2014 as signs mount that dwindling US stockpiles are contributing to a tightening global market. Bitcoin was trading slightly below $11 000. Terminal users can read more in our markets blog.
Here’s what to watch out for this week:
• Earnings season is in full swing: Novartis, General Electric, Intel, LVMH Moet Hennessy Louis Vuitton, Starbucks and Hyundai all come later in the week.
• Barring any last minute changes in Washington, President Donald Trump will join world leaders and senior executives in Davos for the annual World Economic Forum.
• The European Central Bank announces its rate decision on Thursday.
• The UK House of Lords is considering Prime Minister Theresa May’s Brexit bill this week.
These are the main moves in markets:
Stocks
• The MSCI Asia Pacific Index was little changed as of 3:15 pm Tokyo time.
• Topix index was down 0.5% at the close, while the Nikkei 225 Stock Average fell 0.8%.
• Hong Kong’s Hang Seng Index was little changed, while the Hang Seng China Enterprises Index was up 0.7% after dropping as much as 0.6% earlier; it has been rising for 18 straight days.
• South Korea’s Kospi index was little changed.
• Australia’s S&P/ASX 200 Index climbed 0.3%.
• Futures on the S&P 500 Index were little changed.
Currencies
• The Japanese yen advanced 0.4% to ¥109.90/$.
• The euro climbed 0.2% to $1.2322, near strongest in more than three years.
• The Bloomberg Dollar Spot Index was down 0.3% and reached its weakest in three years.
Bonds
• The yield on 10-year Treasuries was little changed at 2.62%.
• Japan’s 10-year yield was flat at 0.076%.
Commodities
• West Texas Intermediate crude was little changed at $64.453 a barrel.
• Gold was little changed at $1 342.06 an ounce.
• LME copper advanced 0.4% to $6 947.00 per metric ton.
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