World equities take a spill on Trump healthcare setback

HONG KONG - Asian stocks are set to start the week on a cautious note as President Donald Trump's stunning failure to get healthcare reform passed raised concerns about the prospects for his plans to use fiscal stimulus to boost economic growth.

Financial markets were unnerved on Friday by Trump's inability to get enough support for legislation to "repeal and replace" the Obamacare health insurance reforms, a major 2016 election campaign promise.

Despite some recent profit-taking, US stocks are still up more than 12 percent since Trump was elected on Nov. 8, the stock prices reflecting views that lower taxes, deregulation and fiscal stimulus would boost economic growth and corporate earnings.

But the failure of Trump's healthcare bill knocked the wind out of risky assets in early Asian trading with US stock index futures falling to a six-week low in heavy volumes while Treasury futures edged higher. and

MSCI's broadest index of Asia-Pacific shares outside Japan was flat in early trade though Australia's stock market tumbled 0.9 percent at the open.

Rising policy uncertainty also raised concerns that a recent revival in business and consumer sentiment, particularly in Asia as evident from recent industry surveys, would be derailed at a time when market valuations appeared stretched.

"For markets, that doesn't sound like an ideal situation," ANZ strategists wrote in a daily note.

The greenback took a spill in early Asian trade on Monday with early moves exaggerated in a very thin market.

The US dollar was down 0.8 percent against the yen at one stage to a 110.44.

The euro rose to a near four-month peak at $1.0847. Against a basket of currencies, the dollar was down nearly half a percent at 99.306..

Treasury futures gained 5/32s in price, suggesting benchmark yields would start lower. On Friday, benchmark 10-year U.S. yields closed near their lowest levels in a month.

Safe-haven gold perked up, rising to $1,253 an ounce..

Oil prices were broadly flat as investor concerns lingered that OPEC-led supply cuts were not yet reducing record U.S. crude inventories.

US crude was trading slightly higher at $48.15 per barrel.

source: news.abs-cbn.com

Asian shares flat but on track for weekly gains

TOKYO - Asian shares flatlined on Friday but were on track for robust weekly gains, while the euro caught its breath after sliding when the European Central Bank trimmed the size of its asset purchase program and also extended it for longer than many had expected.

MSCI's broadest index of Asia-Pacific shares outside Japan wobbled close to the previous session's close in early trading, poised for a weekly gain of 2.2 percent.

Japan's Nikkei stock index was up 0.6 percent, up 2.4 percent for the week in which the dollar gained 0.6 percent against the yen.

The dollar was up 0.1 percent at 114.18 yen.

The euro was licking its wounds at $1.0615. It had been as high $1.0875 before collapsing when markets realized the ECB's actions were actually very dovish.

The ECB said it would reduce its monthly asset buys to 60 billion euros ($63.68 billion) as of April, from the current 80 billion euros, and extend purchases to December from March - three months longer than what some analysts had forecast.

That dragged down two-year yields across Europe and sharply steepened the yield curve, a gift for banks that typically borrow short maturities and lend long.

The promise of lower rates for longer was taken as a green light for carry trades, where investors borrow euros at cheap rates to invest in higher yielding currencies.

"This effective and extended easing may make euro a funding currency of choice and so puts euro-crosses in focus," Westpac analyst Tim Riddell said in a note.

ECB President Mario Draghi said the unexpected move was not an outright winding-down of the central bank's quantitative easing (QE) program, and the central bank reserved the right to increase the size of purchases again if the eurozone economy falters.

The ECB's bond purchase changes came less than a week before the Federal Reserve's policy meeting next Tuesday and Wednesday.

Interest rates futures, implied traders saw a 98 percent chance the US central bank would raise interest rates by a quarter point next week, and about a 50 percent chance it would raise rates by at least another quarter point by June 2017, according to CME Group's FedWatch program.

Despite the impending rate hike, major US stock indexes climbed again on Thursday and set fresh record highs as Wall Street continued its month-long rally following the election of Donald Trump to president.

"We're at a point in time between big announcements from a couple of the big central banks after the ECB, and looking forward to fed next week, so the current momentum underway seems to be the path of least resistance at this point in time," said Bill Northey, chief investment officer of the private client group at US Bank in Helena, Montana.

"We've come a long way, and I wouldn't expect us to keep same pace, but the trajectory might be correct" for dollar strength, he said.

The dollar index, which tracks the greenback against a basket of six major rival currencies, was steady on the day at 101.12, up 0.3 percent for the week.

Oil rebounded on growing optimism that non-OPEC producers might agree to cut output following a cartel agreement to limit production.

US crude added 0.3 percent to $51.01 a barrel.

source: news.abs-cbn.com

Wall Street reels under China shock

U.S. stock indexes tumbled more than 2 percent on the first trading day of 2016 - with the Dow losing more than 400 points - after weak Chinese economic data reignited fears of a global slowdown.

Surveys showed factory activity in the world's second-largest economy shrank sharply in December, sparking a 7 percent slide in Chinese shares that triggered a trading halt.

Adding to investors' worries, China's central bank fixed the yuan at a 4-1/2 year low, further weakening it against the dollar.

"Those are violent New Year fireworks. That's quite a way to start the day off," said Andre Bakhos, managing director at Janlyn Capital LLC in Bernardsville, New Jersey.

The Dow Jones industrial average was down 455.17 points, or 2.61 percent, at 16,969.86, set for its worst day in four months.

At 11:12 a.m. ET (1640 GMT), the S&P 500 was down 52.95 points, or 2.59 percent, at 1,990.99 and the Nasdaq Composite index was down 157.34 points, or 3.14 percent, at 4,850.07.

U.S. data was also not encouraging. Factory activity shrank unexpectedly to 48.2 in December, according to the Institute for Supply Management, missing a reading of 49 expected by economists.

"The old adage is 'if January goes, so goes the year and if the first week goes, so goes the whole month and so on', so it's not a good start," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

The selloff was widespread - all 10 major S&P sectors were lower, led by a 2.8 percent decline in the tech sector .

Microsoft was down 3.7 percent at $53.41 and was the biggest drag on the S&P 500, while Amazon weighed the most on Nasdaq, falling 5.9 percent to $636.08.

Apple was down 2 percent at $103.09. Goldman Sachs was down 2.8 percent at $175.26 and was the biggest drag on the Dow.

Crude oil prices rose after a breakdown in diplomatic ties between Saudi Arabia and Iran raised concerns of supply restrictions.

Gold jumped more than 1.5 percent while benchmark U.S Treasury yields hit two-week lows as investors fled to safe-haven investments.

Netflix was down 7.2 percent at $106.07 after Baird cut its rating on the stock to "neutral". The stock was the biggest percentage loser on the S&P 500.

Tesla was down 8.3 percent at $220.17. The electric car maker said it delivered 17,400 vehicles in the fourth quarter, just about the low end of its guidance.

Among the bright spots, Baxalta was up 2.7 percent at $40.06 as a buyout from UK drugmaker Shire loomed closer.

Declining issues outnumbered advancing ones on the NYSE by 2,684 to 347. On the Nasdaq, 2,366 issues fell and 369 advanced.

The S&P 500 index showed no new 52-week highs and 13 new lows, while the Nasdaq recorded 8 new highs and 85 new lows.

source: www.abs-cbnnews.com

Global stocks, dollar rebound but China smashed again

LONDON - Volatile global markets got some respite from the latest blood-letting on Tuesday as bargain hunters nudged up Asian and European stocks, though China, at the center of the rout, was smashed again.

The dollar and oil prices saw their first rises in five days and some of the positions in safe-haven bonds and currencies such as the yen and the euro were also cut as investors nervously dipped their toes back in the still choppy waters.

China's main equity markets had seen another huge 8 percent drop overnight and Japan's Nikkei had slumped 4 percent, but the rest of Asia had been calmer overall.

Europe also started on a firmer footing after Monday's global beating had wiped around 450 billion euros ($520.70 billion) off the value of its leading stock markets.

The pan-European FTSEurofirst 300 index clawed back 1.7 percent of the more than 5 percent it had lost as London, Paris and Frankfurt bounced 1.5-1.7 percent.

"We are seeing signs of relief with European stocks opening higher despite China extending its losses," said Piotr Matys, an emerging markets expert at Rabobank in London.

"We are trying to decouple but I think it's too early to declare the worst is over though and we are out of the woods. The way I see it is that this is a bit of a technical correction after things got a bit oversold."

The currency market was also calmer. The dollar rose against the yen as it pulled out of a four-day long slide that had left it at a seven-month low.

Traders said a rise in U.S. stock index futures and a brief rebound in Japanese stocks had helped spur dollar-buying against the yen earlier in the day, with the dollar rising to 120.11 yen at one point.

German Bund and other euro zone government bond yields also rose along with those on U.S. Treasuries as the previous day's rush for safety eased, although it was far from plain sailing.

Mainland Chinese shares had another calamitous day, with the Shanghai Composite Index falling another 8 percent and breaking below the psychological level of 3,000. The index fell 15 percent the previous three days, including an 8.5 percent collapse on Monday.

"Global investors are cannibalizing each other. Calling it a market disaster is not an overstatement," said Zhou Lin, an analyst at Huatai Securities.

"The mood of panic is dominating the market ... And I don't see any signs of meaningful government intervention."

Oil prices also stabilized, however, after plunging more than 6 percent and hitting 6 1/2-year lows.

U.S. crude futures traded at $38.73 per barrel, up 1.2 percent on the day, while Brent crude futures last stood at $43.03 after having fallen to $42.23 on Monday. Copper nudged up a fraction too to $4,956 a tonne.
source: www.abs-cbnnews.com

Apart from dollar, investors keep cool about US shutdown

The first U.S. government shutdown in 17-years weakened the dollar on Tuesday, sending it to an eight-month low against the euro, but met a subdued response from investors in equity and fixed income markets.

U.S. Federal government agencies have been directed to cut back services after lawmakers failed to pass a temporary spending bill before a midnight deadline, threatening the salaries of over a million workers.

"No one really knows when they are going to get their act together, so you would have thought there would have more of a reaction than there has been," said Greg Matwejev, director of FX Hedge Fund Sales and Trading at Newedge.

The dollar has borne the brunt of the response so far, falling to a 1-1/2 year low against the safe-haven Swiss franc and hitting an 8-month low against a basket of six major currencies. The weakness lifted the euro to an eight-month high of $1.3589.

However, MSCI's world equity index, tracking shares in 45 countries, gained 0.15 percent by early in the European session, though it saw its biggest daily fall of September on Monday as investors anticipated the shutdown.

Europe's broad FTSEurofirst 300 index inched 0.2 percent higher after the open but held near a three-week low.

U.S. stock index futures also pointed to gains when Wall Street opens later in the with the broad S&P stock futures inched up 0.5 percent after cash prices fell on Monday.

"The U.S. shutdown is a central point for the markets, but as long as the hope for just a temporary shutdown exists, it will not be a strong burden for equities," Christian Stocker, equity strategist at UniCredit said.

Markets were also absorbing the mixed readings on economic activity across the manufacturing sector for September.

Euro zone factory activity grew for the third month running in September as demand enabled picked up. While activity in China expanded only slightly last month raising questions over the strength of its nascent recovery.

DEBT FLAT

In fixed income markets, German government bond yields, normally seen as a safe haven by investors in times of uncertainty, were steady though yields on U.S. Treasury 10-year notes did rise to hit 2.645 percent, a gain of three basis points.

Gold, another traditional safe haven asset, did pop higher after the shutdown became apparent, hitting $1331.66 an ounce, though it is trading well within its recent $1,300 to 1,350 range.

While many market players expect the government shutdown, which in the past has lasted from one day to nearly a month, to ultimately be resolved, they are more fearful about implications for debt ceiling negotiations due later this month.

"People will start to think the deadline for the debt ceiling, which is around the October 17, is not going to be met in that case there is a risk of a default," Eric Chaney, chief economist at AXA Group, said.

Any likelihood of that the U.S. government is going have problems servicing its massive debt is likely to hit equity market hard though it would raise expectations the Federal Reserve will keep its monetary stimulus in place for longer.

Elsewhere Italian bonds were also broadly steady a day before Italian Prime Minister Enrico Letta faces a vote of confidence as Italy tries to draw a line on growing political tensions.

The yield on the benchmark 10-year Italian government bond was up one basis point at 4.58 percent.

Meanwhile Brent crude fell below $108 a barrel to trade near a 7-week low on worries that the shutdown of the U.S. government may crimp oil demand.

Brent crude for November fell 70 cents to $107.67 a barrel. U.S. crude was at $101.99, down 34 cents.

source: www.abs-cbnnews.com