(May 16): The yen climbed and sovereign bond yields dropped as weak U.S. consumer data added to concerns about escalating trade tensions and their impact on the global economy. Asian equities traded mixed.
Japanese stocks fell, while shares showed modest gains in South Korea and Australia. The caution comes despite U.S. equities rising Wednesday as Bloomberg reported President Donald Trump would postpone by up to six months a decision on car tariffs that was due by Saturday. Australian government bond yields plumbed fresh all-time lows, tracking overnight moves in Treasuries that saw the two-year yield touch the lowest level since February 2018 and the 10-year rate drop to 2.37%. Crude oil edged higher and the dollar steadied.
Anxiety remains after unexpectedly weak U.S. and Chinese economic numbers Wednesday heightened worries the trade war could weigh on a global economy that’s already slowing. The possibility that Trump will delay penalties on cars and end steel and aluminum tariffs helped calm investors concerns about his protectionist turn against major trade partners, outside of China.
In the latest development, Trump signed an executive order Wednesday that could restrict Chinese telecommunication firms Huawei Technologies Co. and ZTE Corp. from selling their equipment in the U.S., ratcheting up the battle for control over new 5G technology networks.
Meanwhile, traders are increasing bets on the Fed cutting borrowing costs later this year. Federal Reserve Bank of Richmond President Thomas Barkin said while he favors keeping interest rates on hold for now, he worries that business confidence is fragile amid slowing global growth and trade disputes.
“Depending on how long this standoff with China lasts, that impacts growth for longer and might force the Fed’s hand,” Esty Dwek, senior investment strategist at Natixis Investment Managers, told Bloomberg TV in Singapore. “I wouldn’t expect any big change in the short term, but the possibility of a cut much later in the year has risen.”
Here are some notable events coming up this week:
Earnings this week include Cisco, Nvidia. Bank of Indonesia has an interest rate decision on Thursday. Australian unemployment is out on Thursday.
And here are the main market moves:
Japan’s Topix index slid 0.3% as of 9:05 a.m. in Tokyo. S&P 500 Index futures dipped 0.1%. The underlying gauge rose 0.6% Wednesday. Australia’s S&P/ASX 200 Index rose 0.1%. South Korea’s Kospi added 0.1%. Hang Seng futures earlier slipped 0.4%.
The yen rose 0.2% to 109.44 per dollar. The offshore yuan was at 6.9065 per dollar. The Bloomberg Dollar Spot Index rose 0.1%. The euro was steady at $1.1207.
Australia’s 10-year yield slid three basis points to 1.67%. The yield on 10-year Treasuries held at 2.37%.
West Texas Intermediate crude rose 0.2% to $62.17 a barrel. Gold was steady $1,296.34 an ounce. - Bloomberg