Declines slow for Asia equities and dollar

January 24, 2017

by: Hudson Lockett in Hong Kong

Tuesday 02:10 GMT

Overview

A rolling retreat by global stocks eased as Asia trading commenced, with the dollar’s decline against regional currencies slowing after President Donald Trump withdrew the US from the Trans Pacific Partnership.

Hot topic

While Asian stocks put in another mixed performance, losses were less substantial than the previous day.

Tokyo’s broad Topix Index, which closed Monday down 1.2 per cent, lost a further 0.3 per cent despite a better-than-expected preliminary Nikkei Japan manufacturing PMI reading. The Nikkei 225 was off 0.1 per cent after a 1.3 per cent fall the previous day.

“January’s manufacturing PMI suggests that Japan’s economic recovery picked up pace at the start of the year. What’s more, the weaker yen is fuelling price pressures,” said Marcel Thieliant, senior Japan economist at Capital Economics.

In Australia, the S&P/ASX 200 was up 0.4 per cent, led by gains in the materials and health care segments of 1.3 and 1.2 per cent, respectively.

South Korea’s Kospi Composite was down 0.2 per cent, but Samsung Electronics was up 0.5 per cent after the company reported its best quarterly operating profit in more than three years in spite of the costly recall of its flagship Galaxy Note 7.

Hong Kong’s Hang Seng Index was up 0.3 per cent as casino operators continued to gain on the back of Monday’s visitor numbers for the gambling enclave of Macau. Shares in Galaxy Entertainment rose 1.2 per cent.

In China the Shanghai Composite Index was flat while the tech-focused Shenzhen Composite Index lost 0.1 per cent.

Forex

The greenback appeared to find its footing as the morning session wore on, with the dollar index measuring the US currency against a basket of peers off just 0.1 per cent — a marked deceleration from the 1 per cent fall recorded over the previous two sessions.

After strengthening 1.7 per cent against the dollar on Monday, Japan’s yen weakened 0.2 per cent to ¥112.94. The Australian dollar was 0.2 per cent stronger against its US counterpart at A$0.7596, adding to Monday’s rise of 0.4 per cent.

The renminbi was 0.1 per cent weaker at Rmb6.8582 per dollar despite a stronger fix from the central bank for the currency’s daily trading band.

Fixed income

Market uncertainty continued to drive gains for many government bonds in the region, though the yield (which moves inversely to price) on 10-year US Treasuries was flat at 2.3952 per cent after dropping 7bp on Monday.

The yield on the 10-year Australian government bond fell another 4bps to 2.716 per cent, after Monday’s 3bp drop. The 10-year Japanese government bond yield was down 1bp at 0.048 per cent, having fallen by the same amount the previous day.

Commodities

Gold appeared primed to snap a two-day winning streak as the slowdown in the dollar’s fall sapped enthusiasm. The yellow metal was down 0.2 per cent in Asia at $1,216.46 per ounce.

After a choppy start to the week oil prices regained upward momentum, with the international benchmark Brent crude rising 0.5 per cent to $55.49 per barrel. The US marker, West Texas Intermediate, gained the same amount to $53 per barrel.

For market updates and comment follow us on Twitter @FTMarkets