Stocks sell off on Powell, poor data, yen climbs

Sydney - Stocks in Asia followed their US counterparts lower after hawkish comments from Federal Reserve Chair Jerome Powell and weaker-than-expected economic data from China and Japan.

The yen strengthened after the Bank of Japan reduced longer dated bond purchases.

The MSCI Asia Pacific Index dropped, led by financials, technology and materials stocks. Most national benchmarks declined with Chinese and Hong Kong shares underperforming as China’s official manufacturing gauge fell the most in five years in February.

Data from Japan also added to the negative sentiment - factory output fell more than expected in January and retail sales declined last month from December.

The dollar held gains and Australian bond yields climbed as 10-year Treasury yields steadied around the 2.90% level.

Powell opened the door to the Federal Reserve raising US interest rates four times this year as he acknowledged stronger economic growth may prompt policy makers to rethink their plan for three hikes.

He said he expects the next two years to be strong for the economy and that his personal outlook for growth has firmed since December.
Bond yields have soared in recent months amid speculation that US monetary policy will be tightened at a faster pace than previously thought.

For equity investors, that’s testing nerves - global stocks are poised for their worst month in two years - after years of loose global central bank policy helped push up valuations that look less appealing to some in an environment of higher rates.

Chinese and Hong Kong stocks tumbled. The Hang Seng China Enterprises Index, which tracks the nation’s stocks traded in the city, slid 2.7%. The gauge is the worst performing benchmark in the world this month, down 9%, as record outflows from mainland investors and the weak manufacturing data added to challenges for Hong Kong’s equities.

Elsewhere, crude oil extended a decline as the International Energy Agency warned about seemingly unstoppable US shale production.

Here are some key events scheduled for this week:

The European Union will publish a draft Brexit treaty on Wednesday and UK Prime Minister Theresa May delivers a speech on Friday on Britain’s relationship with the European Union. Japan capital spending is out on Thursday.

These are the main moves in markets:

Stocks

The MSCI Asia Pacific Index fell 1% as of 12:54pm Tokyo time. Topix index fell 0.6%. Hong Kong’s Hang Seng Index fell 1.7%. Kospi index fell 1%. Australia’s S&P/ASX 200 Index declined 0.7%. Futures on the S&P 500 Index fell 0.3%.  

Currencies

The Bloomberg Dollar Spot Index was little changed. The Japanese yen rose 0.1% to 107.19 per dollar. The euro was steady at $1.2225.

Bonds

The yield on 10-year Treasuries rose one basis point to 2.90%. Japan’s 10-year yield rose less than one basis point to 0.05%. Australia’s 10-year bond yield rose four basis points to 2.80%.

Commodities

West Texas Intermediate crude fell 0.6% to $62.62 a barrel. Gold fell less than 0.1% to $1 317.61 an ounce. LME copper fell 0.2% to $7 010 per metric tonne.