Yen gains, Asian stocks stall on Trump Nafta remark

Sydney - Donald Trump grabbed investors’ attention in an otherwise listless Asian trading session, with the yen rising and S&P 500 Index futures slipping with the Mexican peso as the US president said he may end the North American Free-Trade Agreement.

Some of the earlier risk-on trade was unwound, with the dollar pausing after Trump also threatened to shut down the US government if he is unable to get funds to build a wall along the Mexican border. Asian stocks stalled, with benchmarks coming off their highs in Tokyo and declining in Sydney and Seoul. Hong Kong’s trading session was canceled for the day as a typhoon buffeted the city.

“The Nafta hot air may be as much an excuse to take a step back after Wall Street’s surge yesterday, as it is a legitimate concern about the president not appreciating nuances of inter-dependence embedded in trade deals,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore. “The ‘she loves me, she loves me not’ thought process could lead to on-off markets.”

The risk-off reaction to Trump’s comments at a rally of his supporters in Phoenix contrasted with Tuesday’s mood on Wall Street, when stocks jumped amid optimism the president’s administration is making progress on tax reform. European stock futures declined.

“It’s possible he’s trying to take a tougher stance externally to make up for recent confusion within the administration,” said Hideyuki Ishiguro, a senior strategist at Daiwa Securities in Tokyo.

“There’s still the possibility that Trump may suddenly start criticising trade relationships with Japan and China. Investors are worried about those sorts of possibilities.”

There is little top-tier economic data out this week and volumes are being kept low by the Northern Hemisphere summer. The focus turns to the annual conference of global central bankers that kicks off in Jackson Hole, Wyoming, on Thursday with sentiment among investors that global policy makers seem reluctant to tighten liquidity.

Geopolitical events continue to hover in the background. Trump said during his speech that North Korean leader Kim Jong Un is beginning to respect the US, the latest comments that suggest his administration is moving closer to seeking talks over Pyongyang’s nuclear arsenal.

The US tightened its financial restrictions on North Korea, slapping sanctions on Chinese and Russian entities it accused of assisting Pyongyang’s development of nuclear weapons and ballistic missiles.

Among other key events looming this week:

• In Asia on the economic front on Wednesday: Malaysia and Singapore July CPI, and Taiwan July industrial production.

• European Central Bank President Mario Draghi gives a speech in Germany on Wednesday with investors looking for any clues on how the central bank will proceed with its asset purchase programme.

• Minutes from the Governing Council’s July meeting released last week showed that officials are uncertain how to signal changes in their policy settings.

• Combined sales of new (data on Wednesday) and previously owned (Thursday) US homes probably edged up in July from the prior month, indicating a still robust real estate market held in check by rising property prices, economists forecast.

Here are the main moves in markets:

Stocks

• Japan’s Topix index rose 0.3% at the close, the Kospi index added 0.1% and Australia’s S&P/ASX 200 Index declined 0.2%.

• The Shanghai Composite Index fluctuated.

• Futures on the S&P 500 Index fell 0.2% as of 08:31.

• The underlying measure jumped 1% on Tuesday.

• The MSCI Asia Pacific Index rose less than 0.1%, retreating from an advance of as much as 0.3%.

Currencies

• The yen rose 0.2% to 109.37/$.

• The Mexican peso fell 0.4% to 17.7351 per dollar.

• The kiwi lost 0.7% to 72.27 US cents after the New Zealand government trimmed its surplus and growth outlook ahead of an election.

• The Australian dollar dropped 0.3% to 78.88 US cents.

• The Bloomberg Dollar Spot Index gained less than 0.1%.

• The euro was trading at $1.1756.

Bonds

• The yield on 10-year Treasuries was little changed at 2.21%.

• The German 10-year bund yield was steady at 0.40%.

• The Australian 10-year bond yield climbed about three basis points to 2.68%.

Commodities

• West Texas Intermediate crude rose 0.1% to $47.66.

• Gold added 0.1% to $1 286.92 an ounce after a 0.5% decline.

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