Dollar firm, shares ease in Asia as Fed hike looms

SYDNEY - The dollar held broad gains on Friday as the risk of an imminent US interest rate hike slugged sovereign bonds and commodities, even managing to sour Wall Street's party as the reality of rising borrowing costs began to sink in.

Asian stock markets were mostly lower, with MSCI's broadest index of Asia-Pacific shares outside Japan off 0.4 percent and Australia down 1 percent.

Japan's Nikkei eased just a fraction, with a weaker yen helping limit the losses.

A chorus line of Fed officials singing of the need for higher rates has seen the implied probability of a move this month shoot to 74 percent, from just 30 percent at the start of the week.

Fed Chair Janet Yellen and Vice Chair Stanley Fischer are both due to speak later on Friday and are expected to stick to the same tune.

"The US dollar has been snapped up across the board as a March Fed hike is heavily priced in," said Sean Callow, a senior currency strategist at Westpac.

"All it took was about a hundred comments from Fed officials, but markets have finally decided that "fairly soon" means less than two weeks and that perhaps 3 hikes this year means 3 hikes this year."

That was enough to make even Wall Street pause, and the Dow fell 0.53 percent, while the S&P 500 lost 0.59 percent and the Nasdaq 0.73 percent.

Caterpillar was among the biggest casualties, shedding 4.2 percent on news that federal law enforcement officials searched its Illinois facilities.

The prospect of a Fed hike on March 15 saw yields on two-year Treasury notes shatter their recent range to reach ground last trod in mid-2009.

With the European Central Bank still acting to suppress short-term euro rates, the spread between US and German two-year yields yawned out to 214 basis points, the widest since early 2000 and up from a low of 183 in January.

That shoved the euro down to $1.0505 and set up a test of major support at the February low of $1.0492. The dollar likewise climbed to 114.37 yen and nearer to the recent peak of 114.95.

Against a basket of six major currencies, the dollar was firm at 102.130 after touching its highest since Jan. 11.

That strength was not good news for commodities priced in dollars with everything from gold to copper taking a hit.

Gold was down at $1,232.61 an ounce after suffering its biggest one-day decline since December.

Oil prices took an extra blow after Russian crude production remained unchanged in February, showing weak compliance with a global deal to curb supply to tighten the oversupplied market.

Early Friday, US crude was up 6 cents at $52.67, having shed more than 2 percent on Thursday, while Brent was yet to trade at $55.08 per barrel.

source: news.abs-cbn.com

Asia shares seen to join global rally after Trump shock

SYDNEY - Asian shares were set to rally hard on Thursday after global markets made a truly remarkable comeback from the shock of Republican Donald Trump's presidential victory, dumping safe-havens for the tempting returns of risk assets.

The US dollar carved out a staggering range, rebounding from as low as 101.19 yen all the way to 105.83, a move that will come as a huge relief to Japanese exporters.

Nikkei futures were trading at 17,250, no less than 1,000 points above the cash index close, implying stocks would recoup all of Wednesday's 5 percent loss and more.

Yields on US Treasury 10-year notes reversed an initial plunge to 1.716 percent to reach 2.09 percent, the highest since January. The net rise of 21 basis points was also the largest daily increase since July 2013.

Analysts were more than a little puzzled by the moves.

"An astonishing turnaround in risk appetite pushed equities and Treasury yields higher," said Imre Speizer, an economist at Westpac. "Markets appeared to reassess the economic outlook under Trump, towards one of higher growth and higher inflation."

He noted that a key market barometer of 10-year inflation expectations had jumped to a 16-month peak of 1.87 percent.

This in turn led investors to completely revise the outlook for US interest rates, with the probability of a December rate hike by the Federal Reserve going from as low as 30 percent to as high as 80 percent.

The dollar responded by rising across the board. Against a basket of currencies, the dollar recovered from its Wednesday trough of 95.885 to reach 98.602, a gain of 0.8 percent on the day.

Having stretched as high as $1.1299 in the initial panic over Trump's win, the euro then slumped all the way to $1.0913 - a move of almost four cents.

The action was no less noteworthy on Wall Street, where S&P 500 futures had shed 5 percent at one stage in Asia on Wednesday only to stand 1.1 percent higher late in the day.

The Dow jumped 1.4 percent, while the cash S&P 500 and the Nasdaq both added 1.11 percent. Trading volume was the highest since June, when Britain also shocked traders by voting to abandon the European Union.

The CBOE Volatility index, a gauge of investor anxiety, fell 23 percent and was on track for its biggest daily drop since late June.

ASIA WARY ON TRADE, ALLIANCES

Traders said investors piled into financial and healthcare stocks on speculation a Trump administration would greatly ease regulations on the sectors.

Trump has also promised generous tax cuts, particularly for the higher paid, and more infrastructure and defence spending, though analysts were unsure how much of this would actually come to fruition.

There were also concerns about whether Trump would follow through with threatened punitive tariffs on Chinese and Mexican exports, potentially triggering a global trade war.

Mexico's peso was still down 8.7 percent after touching a life-time low overnight.

"Further out, Trump's protectionist policies may prove another big step back in the gradual unwinding of goods globalisation that has defined the past 30 years," wrote analysts at Nomura in a note to clients.

"Another important factor is that a Trump presidency would bring with it uncertainty that could undermine the Pax Americana, with all the benefits this has brought to the world in general and, perhaps, Asia in particular since 1945."

For now, investors seemed willing to give the president-elect the benefit of the doubt, as witnessed by a broad advance in bulk commodity prices.

Copper alone added 3.4 percent while iron ore surged 4.7 percent to its highest since January 2015.

Oil prices recovered along with US equities, with Brent crude up 53 cents at $46.57 a barrel and US crude rising 36 cents to $45.34.

Safe-haven gold, however, pulled back sharply to $1,277 an ounce having been as high as $1,337.40 at one stage.

source: www.abs-cbnnews.com

Global Markets: Shares rally, dollar sags on slow-motion Fed

SYDNEY - Asian shares look set to rise for a sixth straight session on Thursday after the Federal Reserve left U.S. rates unchanged and plotted a lower trajectory for future hikes, slugging the dollar and boosting commodity prices.

Traders expected stocks to at least match the 1.1 percent gain enjoyed by the S&P 500. MSCI's broadest index of Asia-Pacific shares outside Japan was seen testing its recent one-year peak.

While Tokyo was on holiday on Thursday, stocks were boosted on Wednesday by the Bank of Japan's shift to targetting a positive yield curve, a move that was considered bullish for banks, insurers and pension funds.

The U.S. Fed did highlight the risk of a hike in December, but the forward guidance on rates - known as the dot points - left investors feeling any tightening would be glacial at best.

Market pricing for a December move rose only a fraction to 59.3 percent, from 59.2 percent, according to CME Group's FedWatch program.

Richard Franulovich, an analyst at Westpac, noted that back in June the median dot showed five hikes to end-2017. Now it was down to just three. The estimate of the long run neutral rate had also fallen 12.5 basis points to 2.875 percent.

"We do not feel that the dollar has the wherewithal to make a more concerted run higher in the next few weeks," he added. "The FOMC is unlikely to deliver anything more than a very 'dovish' December hike."

The dollar was down at 100.40 yen, having lost 1.3 percent on Wednesday to touch a 3-1/2 week low of 100.30. The euro had popped up to $1.1190, while the dollar index stood at 95.499 after easing 0.5 percent from a more than six-week high of 96.333.

CENTRAL BANKS STILL TRYING

The yen had gained broadly after the BOJ's shift to yield curve control - already abbreviated by the market to "YCC" - left some unimpressed.

"Fundamentally, it did not amount to an easing of monetary policy, but merely offers policy tweaks at the margin and a strengthening of forward guidance," said Frederic Neumann, co-head of economic research at HSBC.

"The BOJ now essentially promises to purchase JGBs for even longer, until inflation exceeds, and not merely meets, its 2 percent inflation target."

Another central bank struggling with too-low inflation is the Reserve Bank of New Zealand and it renewed a pledge to lower rates again on Thursday even as much of the domestic economy is growing briskly.

The RBNZ's blunt statement that further easing would be needed knocked the local dollar down half a US cent to $0.734, but the market has found it hard to sell a currency that still offers an overnight interest rate of 2 percent.

In commodity markets, gold traded at $1,332.36 an ounce, having climbed 1.6 percent as the US dollar declined.

Oil prices had climbed as much as 3 percent on Wednesday after a third surprise weekly drop in US crude stockpiles boosted the demand outlook in the world's largest oil consumer.

Another supportive factor was an oil workers' strike in Norway, which threatened to cut North Sea crude output.

U.S. crude (WTI) futures were up another 29 cents early Thursday at $45.63 a barrel. Brent crude futures had finished $1.17 higher at $47.05 per barrel.

source: www.abs-cbnnews.com