Asia stocks slip on spectre of higher US rates

Friday, 25 November 2016 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Most Asian stock markets fell on Thursday as upbeat economic data strengthened the prospect for higher US interest rates, while the dollar’s bull run continued with US bond yields propelled to multi-year highs.

Japanese stocks swam against the tide and rose to a near 11-month high as the yen weakened.

Spreadbetters saw a mixed opening for European stocks, forecasting a slightly lower open for Britain’s FTSE, a marginally higher open for Germany’s DAX and a flat start for France’s CAC.

The dollar index against major currencies rose 0.1% to 101.78, not far from a 13-1/2-year high of 101.91 touched overnight.

The greenback drew support from a further rise in US Treasury yields.

The two-year yield hit its highest levels since April 2010 on Wednesday on further bets the Trump administration will increase debt-funded spending and spur growth and inflation.

Such a view – whichhas also lifted expectations for more US rate hikes next year – wasreinforced on Wednesday after new orders of US manufactured capital goods rebounded in October. Consumer sentiment also jumped in November.

The dollar was up 0.1% at 112.650 yen after touching an eight-month high of 112.980 overnight. It has gained roughly seven big figures since Trump’s victory earlier this month.

MSCI’s broadest index of Asia-Pacific shares outside Japan pared Wednesday’s gains and lost 0.4% as focus returned to the United States. Facing the prospect of higher US interest rates diverting money from emerging markets, it has lost 3.5% this month.

Japan’s Nikkei was up 1.1%, touching its highest level since early January.

Equities in emerging and developed economies have headed in different directions since Trump’s win.

Higher US yields have pulled those of other developed economies from rock-bottom levels, with investor money now expected to flow back from emerging markets which had offered relatively higher rates.

The Dow marked a record closing high overnight. Germany’s DAX has gained nearly 2% since the victory by the Republican candidate. On the other hand, MSCI’s emerging markets index has fallen 5.8% this month.

Japan’s 30-year bond yield rose to an eight-month peak of 0.650%. The German 10-year bund yielded around 2.6% on Wednesday, having climbed from a record low of minus 0.2% struck in July.