Asian Stocks to Gain as Fed Chair Talk Hits Bonds

Stocks in Asia paused near recent highs as concerns about North Korea reemerged, while Australian bonds fell with Treasuries as speculation climbed that the next head of the Federal Reserve will be more hawkish.

Equity benchmarks fluctuated across Asia after the S&P 500 Index eked out a fresh record high. North Korea warned that a nuclear war could “break out any moment,” sparking a pullback in the region’s markets — one of a number of geopolitical risks, along with the Brexit and Catalan-secession impasses. Australia’s dollar fell after the nation’s central bank said low interest rates were underpinning growth. The pound held losses after breaking a five-day winning streak on speculation that Brexit talks could be headed for a breakdown.

Global stocks began the week supported by Fed chair Janet Yellen saying she expects to continue raising rates gradually amid solid U.S. growth, even as inflation remains surprisingly low. The dollar rose and Treasuries slid as John Taylor, a candidate for Fed chairman who is known for a policy rule that could be read to suggest higher interest rates, was said to have impressed President Donald Trump in an interview last week.

Copper stayed above $7,000 a metric ton for the first time since 2014. Oil retreated slightly, though remained close to a two-week high as Iraqi troops clashed with Kurdish forces, disrupting supplies from a region that produces more than half a million barrels a day.

In Spain, investors are awaiting the next move in a crisis that has weighed on Spanish assets and may also roil the euro. Elsewhere, Mexico’s peso fell to a five-month low after Trump’s administration made aggressive demands during a fourth round of negotiations on the future of the North American Free Trade Agreement.

A host of Fed speakers and the publication of the Beige Book this week may provide further clues about the U.S. policy path. Australia’s central bank reaffirmed that growth will increase gradually as interest rates are low, in minutes from its meeting earlier this month.

Here are the main moves in markets:

Stocks

· Japan’s Topix index rose 0.1 percent as of 2 p.m. in Tokyo after gaining as much as 0.6 percent. Australia’s S&P/ASX 200 Index rose 0.8 percent and South Korea’s Kospi index was up 0.2 percent.

· Hong Kong’s Hang Seng Index and the Shanghai Composite Index were little changed.

· Futures on the S&P 500 Index were flat. The underlying gauge rose 0.2 percent Monday to close at yet another historic high level.

· Netflix Inc. shares rose in after-hours trading as the firm stormed ahead in its drive to create a global television network, scoring the video-streaming provider’s best third quarter on record and sending the shares to a new high.

· The MSCI Emerging Market Index was little changed after adding 0.5 percent to the highest in six years on Monday, while the MSCI All Country World Index was also steady near a record high level.

Currencies

· The Bloomberg Dollar Spot Index gained 0.1 percent, extending gains.

· The Australian dollar was trading at 78.46 U.S. cents after dropping as low as 78.35.

· The euro fell 0.1 percent to $1.1780.

· The British pound was at $1.3256 after slipping 0.3 percent in the Monday session.

· The yen traded at 112.13 per dollar.

· The kiwi rose as much as 0.5 percent and was trading at 71.66 U.S. cents after New Zealand’s inflation data topped estimates.

Bonds

· The yield on 10-year Treasuries was steady at 2.30 percent after rising three basis points on Monday.

· Australia’s 10-year yield added one basis point to 2.76 percent.

Commodities

· West Texas Intermediate crude held gains at $51.79 a barrel after climbing 0.8 percent in the previous session.

· Gold headed lower to $1,292.89 an ounce after falling 0.6 percent.

· LME copper remained above $7,000 a metric ton, close to the highest in more than three years, after it jumped 3.7 percent on Monday.

Source: Bloomberg

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