US dollar and shares take a slight dip
A possible currency manipulator could be in the pipeline
SHARES and the US dollar dipped yesterday while US bond yields slumped to five-month lows after soft US economic data hurt investor sentiment already frayed by worries over North Korea and coming French elections.
That dwarfed any relief for market players after the US Treasury department did not name China as a currency manipulator, avoiding an all-out confrontation on currencies between the world’s two largest economies.
S&P 500 mini futures declined 0.15% to 2 324, edging near a six-week low of 2 317.75 touched in late March following US President Donald Trump’s defeat on health-care reform.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.1% in holiday-thinned trade, while Japan’s Nikkei fell as much as 0.6% to hit a five-month low before ending up 0.1%.
Most European share markets were closed for Easter holidays.
China’s economy grew 6.9% in the first quarter from a year earlier, a tad above economists’ forecast of 6.8%.
However, mainland Chinese shares fell, with Shanghai Composite Index down 1.0% at 3 212, risking a close below its 60-day average at 3 216, seen as an important support by investors and weighed by warnings from the top securities regulator to combat market misbehaviour.
US retail sales dropped more than expected in March, while annual core inflation slowed to 2.0%, the smallest advance since November 2015, from 2.2% in February, data showed on Friday.
That helped to drive down the 10-year US Treasuries yield to 2.200%, its lowest level since mid-November from around 2.228% on Thursday before a market holiday on Friday.
Trump’s administration declined to name any major trading partner as a currency manipulator in a highly anticipated report on Friday, backing away from a key Trump campaign promise to slap such a label on China.
“Concerns about US-Sino trade frictions have eased for the time being,” said Naoki Tashiro, the president of TS China Research.
“But this is also thought to be a part of a barter, namely the US wants China to take tougher actions against North Korea in exchange,” he said.
There is no sign of easing in tensions over North Korea’s nuclear and missile programme after the reclusive country’s failed missile test on Sunday.
Trump’s national security adviser said on Sunday that the US, its allies and China were working together on a range of responses to North Korea.
“In essence, North Korea made a provocation that would not transcend the US ‘red line’. But depending on how China will react, Trump could lose his patience,” said Makoto Noji, senior strategist at SMBC Nikko Securities.
The dollar slipped to as low as 108.13 yen, a five-month low and 0.4% below its late US levels.
The euro stood at $1.0622, little moved so far, and not far from a one-month low of $1.0570 touched last Monday, with focus on the French presidential election.
Ahead of the first round of voting on April 23, the race looked tighter. Two polls put any of the four front runners, including far-right candidate Marine Le Pen and hard-left challenger Jean-Luc Melenchon, within reach of a two-person run-off vote.
Oil prices slipped on signs the US is continuing to add output, undermining Opec efforts to support prices.
Benchmark Brent crude futures were down 10% at $55.34 a barrel. – Reuters