Asia Stocks Retreat From Rally; Dollar Slips

Stocks in Asia took a sudden turn lower in afternoon trading, led by Japan, as some traders ascribed technically-driven trading after indexes hit historic highs earlier in the day. Haven assets from the yen to gold climbed as investors kept an eye on U.S. President Donald Trump’s visit to China.

The MSCI Asia Pacific Index, which passed its 2007 peak earlier in the day, fell as Japan’s equities relinquished advances of at least 1 percent. While it wasn’t immediately clear what propelled the mid-afternoon reversal, Kabu.com Securities Co. said the rally in the Nikkei 225 Stock Average and Topix index, which had propelled them to quarter-century highs, was too fast. Trump said in an appearance in Beijing that the power exists to liberate the world from the North Korea “menace.” Worries over North Korean tensions have periodically spurred bouts of risk-aversion trades this year.

Stocks in Tokyo earlier touched their highest in about 25 years, with the Nikkei 225 climbing as much as 2 percent before dropping 1.7 percent, staging the biggest point swing since exactly a year ago when Trump was swept to a surprising victory in the U.S. election. Stocks were up in Hong Kong and Sydney, and declined in Seoul. S&P 500 Index futures dropped.

The exuberance is of some concern to Oaktree Capital Group LLC’s Howard Marks, who pointed to the divergence between a bond market pricing in lackluster economic growth and a booming stock market in a Bloomberg TV interview in Hong Kong. Ten-year Treasury yields have declined after reaching the highest since March in late October, even as the U.S. stocks have been clocking record highs.

The New Zealand dollar held onto most of the gains sparked late in the New York session Wednesday after the central bank flagged it may raise interest rates earlier than expected. The central bank kept its official cash rate at a record-low 1.75 percent on Thursday, and brought forward its forecast for a rate hike to the second quarter of 2019 from the third.

Bitcoin soared to another record after a technology upgrade that was threatening to disrupt the biggest cryptocurrency was called off.

The progress of tax-reform talks continues to be a backdrop for the markets. Among the latest developments, the tax proposal released on Thursday will be a “conceptual mark,” instead of detailed legislative text, according to the Senate Finance Committee. The House tax-writing committee entered its third day of work Wednesday to hammer out the details of the Republican tax-cut plan.

These are the main moves in markets:

Stocks

  • Japan’s Topix index swung from a gain of as much as 1.5 percent to a decline of the same magnitude before closing 0.3 percent lower in Tokyo. The Nikkei 225 ended down 0.2 percent, giving up a 2 percent gain and a drop of as much as 1.7 percent.
  • Australia’s S&P/ASX 200 Index rose 0.6 percent at the close.
  • Hong Kong’s Hang Seng Index rose 0.6 percent.
  • Contracts on the S&P 500 fell 0.1 percent. The underlying measure closed 0.1 percent higher on Wednesday.
  • The MSCI Asia Pacific Index fluctuated after jumping as much as 0.7 percent.
  • Currencies

  • The yen advanced 0.2 percent to 113.63.
  • The kiwi dollar jumped 1 percent to 69.67 U.S. cents in late New York trading, but declined 0.1 percent in Asia. The New Zealand dollar has bounced off its weakest since May, a low point reached after Labour formed government last month.
  • The Aussie dollar was little changed at 76.79 U.S. cents.
  • The euro traded flat at $1.1605.
  • Bonds

  • The yield on 10-year Treasuries was steady at 2.32. It touched 2.48 percent, the highest since March, in late October.
  • Australia’s 10-year yield climbed more than two basis points to 2.60 percent. It fell to the lowest since June earlier this week.
  • Commodities

  • West Texas Intermediate crude was little changed at $56.83 a barrel.
  • Gold advanced 0.2 percent to $1,283.52 an ounce.
  • Source: Bloomberg