Most Asian Stocks Gain on U.S. Debt-Ceiling Deal: Markets Wrap

September 7, 2017 3oliver

Asian stocks were mixed, giving up some early gains, as investors weighed a U.S. deal that ensures the funding of its government through mid-December against persistent geopolitical tensions. The yen pared an overnight drop.

South Korea’s Kospi index climbed the most since June and Japan’s Topix index also advanced. European equity-index futures rose. U.S. markets gyrated late Wednesday amid several events that happened in rapid succession, including the resignation of Federal Reserve Vice Chairman Stanley Fischer and a surprise Canadian interest-rate increase. The dollar retreated against major peers as North Korean jitters overshadowed the deal to extend the U.S. debt limit for three months. Traders are also watching Category 5 hurricane Irma, which is headed for Florida.

Terry Haines, Evercore ISI senior political strategist, discusses President Donald Trump and the U.S. Congress.

Source: Bloomberg)

While the U.S. agreement pushes to the side the North Korea confrontation that has dominated markets most of this week, traders will remain watchful for developments amid concerns Pyongyang may fire a ballistic missile before its “founding day” on Sept. 9. U.S. President Donald Trump said that military action against the North wasn’t his first choice as South Korea moved to bolster its missile shield on Thursday. Meanwhile, the Fischer departure, effective next month, adds to uncertainty about Fed leadership, given that Janet Yellen’s term as chair expires early next year.

Risks associated with North Korea’s nuclear threat will continue to “unnerve” investors, and today’s rebound is just temporary relief, said Choi Woong-Pil, chief investment officer at KB Asset Management. “We can’t go back to the perfectly comfortable status like before” with the North Korean issue, he said. “I don’t think today’s rebound is that meaningful.”

Attention now turns to the European Central Bank meeting on Thursday, with investors looking for clarity from President Mario Draghi on the outlook for the the ECB’s bond-buying program. The Governing Council has been presented with documents outlining multiple scenarios for adjusting quantitative easing, according to euro-area officials familiar with the matter.

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The key events this week:

U.S. service industries rebounded in August, with the ISM non-manufacturing index rising to 55.3. July’s trade gap widened less than forecast to $43.7 billion amid rising energy and aircraft exports. The Fed’s Beige Book showed limited wage pressures despite a tightening labor market, while describing growth as “modest to moderate.”
China trade figures are anticipated to show another month of solid export growth, while FX reserves probably continued to rise on stricter capital controls, robust growth and a stronger yuan, according to Bloomberg Intelligence.
Malaysia’s central bank will probably hold its benchmark rate at 3 percent at meeting Thursday.
Australian retail sales were unchanged in July from June, while the nation’s trade surplus in July came in less than economists expected.
German industrial production stagnated in July with output unchanged from June when it dropped.

And here are the main moves in markets:

Stocks

The Topix index rose 0.4 percent at the close in Tokyo, while the Kospi index in South Korea was up 1.1 percent and Australia’s S&P/ASX 200 Index was flat.
Hong Kong’s Hang Seng Index fell 0.3 percent as Chinese indexes fluctuated.
Euro Stoxx 50 index futures increased 0.3 percent as of 7:36 a.m. London time.
S&P 500 Index futures slipped 0.1 percent after the underlying gauge rose 0.3 percent.
The MSCI Asia Pacific Index climbed 0.2 percent.

Currencies

The Japanese yen rose 0.1 percent to 109.08 per dollar after falling 0.4 percent Wednesday, when it had earlier traded near its highs for the year. Read here about the impact on the yen in the event of a North Korea war.
The Australian dollar was back below 80 U.S. cents after the retail sales and trade data.
The Bloomberg Dollar Spot Index fell for a sixth day, the longest streak of losses since May. It was down less than 0.1 percent; it hasn’t risen since last Wednesday.
The euro added less than 0.1 percent to $1.1921.
The Canadian dollar surged 1.2 percent Wednesday to its the strongest in more than two years against the dollar after the Bank of Canada raised the benchmark rate to 1 percent. It was at C$1.2235.

Bonds

The yield on 10-year Treasuries fell about one basis point to 2.09 percent after jumping about four basis points Wednesday.
German 10-year yields added more than one basis point to 0.36 percent.
Australia’s 10-year yield rose four basis points to 2.64 percent.

Commodities

Gold was up 0.1 percent $1,335.08 an ounce after falling 0.4 percent Wednesday.
West Texas Intermediate crude fell 0.4 percent to $48.96 a barrel after jumping 1 percent.
The Bloomberg Commodity Index fell 0.2 percent, retreating from its highest since April on Wednesday.

— With assistance by Andrew Dunn