Stocks retreat from recent highs, dollar rebounds

Sydney - Asian stocks pulled back from record highs following declines in their US counterparts and as the dollar recovered from recent weakness. Treasuries fell amid Congressional talks to avert a government shutdown on Friday.

The MSCI Asia Pacific Index dropped as healthcare, materials, and energy stocks weighed. Benchmark indexes in Sydney and Tokyo were lower, while stocks in China rose. The euro retreated from a three-year high against the greenback and sterling slipped.

The yen weakened after a six-day streak of gains. Bitcoin rebounded above $11 000 after slumping as much as 26% on Tuesday.

Traders are questioning the pace of gains in equity markets at the start of 2018 as the earnings season ramps up and bond investors mull the potential for monetary policy in the US to be tightened more quickly.

The flattening of the yield curve is also back in focus after a brief movement in the opposite direction earlier this month.

"It’s more of a healthy correction" in stocks, said Hartmut Issel, head of Asia Pacific equity and credit at UBS Wealth Management in Singapore, on Bloomberg Television.

"The last two and a half weeks have been very strong and in some cases we were really wondering if you extrapolate this another three or four weeks we would have exhausted the potential we saw for the entire year."

Elsewhere, West Texas oil was little changed before US government data forecast to show crude stockpiles fell for a ninth week.
Here’s what to watch out for this week:

Earnings season ramps up: Taiwan Semiconductor Manufacturing, Bank of America and Goldman Sachs Group are among notable releases. Industrial production in the US probably increased in December, a report may show on Wednesday, completing a solid year for manufacturing.

US housing starts probably slipped in December for the first time in three months as frigid winter weather impeded work, forecasts show ahead of Thursday’s release. The Bank of Canada’s interest-rate decision comes on Wednesday.

Monetary policy announcements are also this week due in South Korea, South Africa and Turkey. China releases fourth quarter GDP, December industrial production and retail sales on Thursday.

And these are the main moves in markets:

Stocks

Euro Stoxx 50 futures declined 0.3% in early European trading. Futures on the S&P 500 Index increased less than 0.1%. The MSCI Asia Pacific Index decreased 0.2% as of 4:16pm.

Tokyo time. Topix index fell 0.2%. Hong Kong’s Hang Seng Index declined 0.1%. Kospi index sank 0.3%.

Australia’s S&P/ASX 200 Index declined 0.5% to the lowest in more than a month on the largest fall in a week.

Currencies

The Bloomberg Dollar Spot Index gained 0.2%, the first advance in more than a week. The Japanese yen sank 0.3% to 110.82 per dollar, the first retreat in more than a week and the biggest dip in four weeks.

The euro decreased 0.3% to $1.2228, the largest decrease in more than a week.

Bonds

The yield on 10-year Treasuries gained two basis points to 2.56%, the highest in about 10 months on the biggest climb in more than a week. German 10-year bund yields were little changed at 0.56%.

Commodities

West Texas Intermediate crude gained less than 0.05% to $63.74 a barrel. Gold dipped 0.3% to $1 333.89 an ounce, the largest decrease in more than a week. LME copper declined 0.2% to $7 063.00 per metric ton, the lowest in four weeks.