Asia stocks mixed, dollar slips on Fed rate outlook

Investors continue to plow money into shares in emerging markets

Asian stocks were mixed on Monday in thin trade, following Wall Street’s declines and the G20’ s decision to drop a pledge to avoid trade protectionism, while the Federal Reserve’s less hawkish- than- expected comments continued to weigh on the dollar.

MSCI’s broadest index of Asia- Pacific shares outside Japan added 0.3 percent.

Australian shares closed down 0.36 percent. South Korea ended the day 0.35 percent lower.

The MSCI emerging markets index added 0.4 percent to hit its highest level in more than two years on Monday.

Investor sentiment toward emerging markets, while cooling, remains positive. Emerging market equity funds had their sixth straight week of inflows in the week ending Wednesday, but the pace slowed. They had net inflows of $ 215 million, compared with nearly $ 1 billion in the previous week, according to Thomson Reuters data.

On Friday, Wall Street was flat to negative, dragged lower by bank shares that fell along with Treasury yields.

Financial leaders from the world’s biggest economies reiterated their warnings against competitive devaluations and disorderly foreign exchange markets at the meeting in the German town of Baden- Baden over the weekend.

But they failed to agree on a commit- ment to keep international trade free and open, highlighting a global shift toward protectionism.

On Sunday, German Chancellor Angela Merkel and Japan’s Prime Minister Shinzo Abe defended free trade, calling for a trade deal to be reached quickly between Japan and the EU, distancing themselves from protectionist rhetoric coming from the Trump administration.

“Essentially [ the G20 outcome was] a result of the US protectionist stance, something Trump has been very clear on, and the market is well aware of this,” said James Woods, global investment analyst at Rivkin Securities in Sydney. “Importantly we saw other leaders such as Shinzo Abe and Angela Merkel come out publicly supporting free trade, and for now the protectionist stance remains constrained to the US. It would be more concerning if this began spreading to other countries.”

The dollar didn’t react to the statements from the meeting, hovering close to its near- three- week low touched on Friday.

It traded almost 0.2 percent lower at 112.54 yen ($ 1.0), its fourth straight day of declines after the Fed reiterated plans for three rate hikes this year, fewer than the four that markets were expecting.