Mar­kets on edge as US cam­paign en­ters fi­nal week

Kuwait Times - - BUSINESS -

Euro­pean shares were poised to fall for a sev­enth straight ses­sion while the dol­lar edged lower with in­vestors largely hold­ing back as the con­tentious US pres­i­den­tial cam­paign en­tered its fi­nal week. Ear­lier in the day, stronger-than-ex­pected man­u­fac­tur­ing data from China un­der­pinned gains in Asian stocks and fur­ther stoked in­fla­tion ex­pec­ta­tions that drove a sell­off in bonds in re­cent weeks.

Fore­cast-beat­ing re­sults from oil ma­jor Royal Dutch Shell ini­tially pro­vided a boost to Europe’s STOXX 600 in­dex but those gains proved short­lived with weak­ness in banks drag­ging the in­dex 0.1 per­cent lower.

Trad­ing vol­umes were light across ma­jor Euro­pean ex­changes. The dol­lar was slightly weaker against a bas­ket of cur­ren­cies with the dol­lar in­dex down 0.2 per­cent. In a busy week for cen­tral banks, the Bank of Ja­pan and Re­serve Bank of Aus­tralia held their poli­cies steady as ex­pected.

The BoJ also held off on ex­pand­ing stim­u­lus yes­ter­day but once again pushed back the tim­ing for hit­ting its in­fla­tion tar­get. The dol­lar hov­ered around 104.80 yen. “We’re in limbo, un­for­tu­nately, ahead of the US elec­tion,” said Bart Wak­abayashi, head of Hong Kong FX sales at State Street Global Mar­kets. Hil­lary Clin­ton held a five-per­cent­age-point lead over Repub­li­can ri­val Don­ald Trump, ac­cord­ing to a Reuters/Ip­sos opin­ion poll re­leased on Mon­day, down only slightly since the FBI said last week it was re­view­ing new emails in its in­ves­ti­ga­tion of Clin­ton ahead of the Nov. 8 elec­tion.

Mar­kets see only a small chance that the US Fed­eral Re­serve will raise rates when it con­cludes its meet­ing on Wed­nes­day, but traders will be scour­ing its state­ment for clues on the tim­ing of its next rate hike. Chances of a rate hike in De­cem­ber were at around 78 per­cent, ac­cord­ing to the CME Group’s FedWatch Tool.

Mean­while, Italy’s bor­row­ing costs hit fresh two-year highs yes­ter­day with in­vestors wary of po­lit­i­cal risks and bank­ing sec­tor re­forms con­tin­u­ing to run into hur­dles. Other euro zone bond yields also rose be­tween 3-4 ba­sis points on the day, with Ire­land’s 10-year bond yields hit­ting its high­est level since June, ris­ing 4 bps to 0.69 per­cent.

The ramp-up in yields has been a cen­tral theme across mar­kets over the past month, spurring tur­bu­lence in debt mar­kets and send­ing global in­vestors out of bonds and into cash on fears that a multi-decade bond bull run was com­ing to an end.

Asian mar­kets higher

Hong Kong led most ma­jor Asian mar­kets higher yes­ter­day, with data in­di­cat­ing fore­cast-beat­ing growth in Chi­nese fac­tory ac­tiv­ity pro­vid­ing a boost but un­cer­tainty over the US pres­i­den­tial race keep­ing in­vestors on edge. The closely watched pur­chas­ing man­agers’ in­dex hit its high­est level in more than two years, Bei­jing said, in­di­cat­ing that the im­por­tant man­u­fac­tur­ing sec­tor-and the world’s num­ber two econ­omy-is lev­el­ling out.

A sep­a­rate pri­vate in­dex also beat ex­pec­ta­tions to hit its high­est mark since July 2014. The fig­ures come weeks af­ter of­fi­cial data showed eco­nomic growth sta­bil­is­ing and putting the govern­ment on track to achieve its an­nual tar­get, while an­other read­ing showed a first in­crease in fac­tory gate prices for four years. “The mar­ket has turned more pos­i­tive and con­fi­dent that China’s econ­omy will sta­bilise in the fourth quar­ter,” Li­nus Yip, a Hong Kong­based strate­gist at First Shang­hai Se­cu­ri­ties, told Bloomberg News.

“Af­ter a cor­rec­tion in Hong Kong and be­ing at a rel­a­tively low level, the mar­ket needed some stim­u­lus to gain power and the China fig­ures helped trig­ger that.”

Hong Kong stocks closed up 0.9 per­cent, hav­ing re­treated al­most three per­cent in the pre­vi­ous five days. Shang­hai ended up 0.7 per­cent and Tokyo re­versed early losses to end 0.1 per­cent higher. Sin­ga­pore put on 0.4 per­cent in late trade. But Syd­ney shed 0.5 per­cent and Seoul was slightly lower while Welling­ton and Taipei also fin­ished lower.

In Asian trade the dol­lar bought 18.86 pe­sos com­pared with 18.96 pe­sos the day be­fore. The dol­lar edged up later in the day against the yen af­ter the Bank of Ja­pan once again pushed back its in­fla­tion time­line. The cen­tral bank now ex­pects prices to move “to­ward” two per­cent by March 2019 — four years later than its orig­i­nal goal, which was set by gover­nor Haruhiko Kuroda in 2013.

An­a­lysts said the move could mean the BoJ will hold off new eas­ing un­til late next year to give prices time to pick up.

The pound rose against the dol­lar, hav­ing en­joyed a rare bump af­ter Bank of Eng­land gover­nor Mark Car­ney said he would ex­tend his ten­ure by an­other year, putting an end to spec­u­la­tion over his fu­ture. — Agen­cies

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