Stocks, gold fall as Fed hike back on the cards

HONG KONG - Asian stocks fell and the US dollar stood tall on Thursday as markets scrambled to factor in the possibility of another interest rate increase by the Federal Reserve as early as June. Gold stumbled.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.8 percent in early trade as the prospect of a second U.S. rate hike in six months raised concerns for emerging markets already grappling with a slowing China.

South Korea and Australia led regional markets lower with 0.5 and 0.6 percent falls each as investors refocused their attention on the growing differences between the health of the world's biggest economy and its global counterparts.

"In the short term, emerging markets are the most vulnerable," Steven Englander, global head of G10 FX strategy at Citibank wrote in a note to clients.

"Overall, the divergence trade is revived until further notice," he wrote in a note to clients, saying the Canadian dollar and the Aussie were vulnerable due to concerns around those economies.

Japan's Nikkei rose early thanks to a weaker yen, which fell to a three-week low against the dollar after minutes of the last Fed meeting suggested a rate increase is firmly on the table at its policy review next month. But the Nikkei later pared its gains to just 0.2 percent.

The Fed minutes noted Fed officials said it would be appropriate to raise interest rates in June if economic data points to stronger second-quarter growth as well as firming inflation and employment.

Such views helped revive the prospect of a rate hike in June, which had been dismissed by many investors.

CME fed fund futures showed that the probability of a June rate increase by the Fed rose to 34 percent after the release of the FOMC minutes on Wednesday from 19 percent earlier in the day, 15 percent on Tuesday, and less than 1.0 percent a month ago, according to CME group's FedWatch.

Still, many in the market are still sceptical the Fed would raise rates ahead of Britain's June 23 referendum on whether to remain in the European Union, a risk that was pointed out by some Fed policymakers. July may be a stronger possibility.

The dollar index hovered just below a seven-week high of 95.27 scaled overnight, boosted by sharply higher U.S. Treasury yields.

The benchmark 10-year Treasury note yield jumped more than 10 basis points on Wednesday while the yield curve steepened slightly, breaking a multi-month streak of flattening.

The greenback was steady at a three-week high of 110.25 against the yen hit overnight. The euro was pinned down near $1.1214 , its lowest since late March.

"With April activity indicators consistent with a healthy bounce-back in growth, we see risks of two rate hikes in 2016, with the first coming in the June/July time horizon," strategists at Barclays said.

Fed Vice Chairs William Dudley and Stanley Fischer are due to speak later in the day and the markets will be eager to get more details on the Fed's thinking.

Gold took the renewed expectations of a U.S. rate hike on the chin. Prices for the precious metal are inversely correlated to monetary policy easing, fell 0.1 percent to a three-week low $1256 per ounce.

The stronger dollar also weighed on commodities such as oil, which saw U.S. crude futures lose 0.4 percent to $48.00 a barrel. A stronger dollar tends to put non-U.S. buyers of greenback-denominated commodities at a disadvantage.

Three-month copper on the London Metal Exchange fell to as low as $4563.50 overnight, the weakest since Feb. 19 and was hovering near those levels.

source: www.abs-cbnnews.com

Asian shares off to cautious start after G20, US data

TOKYO - Asian stocks were off to a cautious start on Monday after a weekend meeting of the Group of 20 economic policymakers ended with no new coordinated action to spur global growth and as solid U.S. data revived expectation of a U.S. rate hike before year-end.

MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.2 percent, while Australian shares were up 0.4 percent and South Korean shares were flat.

Japan's Nikkei gained 1 percent largely on the overnight fall in the yen while U.S. stock futures were little changed from late last week.

G20 finance ministers and central bankers agreed to use "all policy tools – monetary, fiscal and structural – individually and collectively" to reach the group's economic goals, citing a series of risks to world growth.

Some market players say the statement could mildly underpin market sentiment, but the lack of any concrete action plans provided for few catalysts.

"The G20 communique basically says 1) the world is not as bad a place as markets think; and 2) if it gets worse we will use fiscal, monetary and structural policy aggressively to fix it," Steven Englander, global head of G10 FX Strategy at CitiFX, said in a note to clients.

"In baseball parlance, they were aiming for a single in terms of restoring confidence and they probably achieved it," he added.

Fresh U.S. economic data published on Friday revived expectations of Federal Reserve rate increases, helping to lift U.S. bond yields and the dollar.

Consumer spending rose solidly in January and underlying inflation picked up by the most in four years. Gross domestic product growth in the fourth quarter was revised higher, to a 1 percent annual rate

The figures prompted Federal funds rate futures to price in a more than 50 percent chance of one rate hike by the end of year, compared to almost zero percent chance in mid-February.

The two-year U.S. Treasuries yield also hit a four-week high of 0.817 percent on Friday and last stood at 0.801 percent versus its Feb 11 low of 0.582 percent.

The greenback's yield allure helped lift the dollar's index against a basket of six major currencies to a three-week high of 98.26 on Friday. It last stood at 98.13.

As the dollar gained, the euro fetched $1.0920, having slipped to a three-week low of $1.0912 on Friday. In early Asia on Monday, it traded at $1.0931, flat on the day.

The yen also slipped to one-week low of 114 to the dollar on Friday but bounced back 0.2 percent on Monday to 113.75.

Fears of "Brexit" offered traders a good excuse to sell the British pound, which fell to a seven-year low of $1.3854.

Although the British government managed to get G20 to agree to include a warning against "Brexit" in the statement, that appeared to have limited impact, with sterling trading slightly weaker at $1.3861.

In the oil market, U.S. crude futures were little moved at $32.76 per barrel, holding on to their 11 percent gains made last week, its steepest weekly rise since August.

source: www.abs-cbnnews.com