Asia Stocks Drop as Iron Ore Hits Commodity Shares

EghtesadOnline: Asian equities fell, with Australian shares slumping as a selloff in iron ore pulled down commodity producers. Japanese stocks benefited from a weaker yen while gold fell for a third day.

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18 April 2017

Markets in Sydney and Hong Kong dropped after a two-day holiday, as investors caught up with global markets that have been weighed down by geopolitical concerns. Tokyo shares rose amid weakness in the yen after Treasury Secretary Steven Mnuchin said the dollar’s strength is “a good thing.” Iron ore futures slid, extending losses after falling into a bear market earlier this month.

According to Bloomberg, investors continued to assess risk factors in the absence of any major international incidents that damped the prospects for global growth. The U.S. has gotten encouraging signs that China will act to pressure Kim Jong Un’s regime to dismantle its nuclear weapons program, a State Department official said, but the Trump administration is holding on to military action -- alone or with allies -- as an option.

Readings on American housing and New York manufacturing lowered the odds for higher interest rates, while faster growth in China boosted optimism about the strength of the global economy.

Here’s what investors are watching this week:

U.S. Vice President Mike Pence continues his tour of Asia. The U.S. trade relationship with South Korea is “falling short,” with the free-trade deal between the countries under review, Pence said Tuesday.

Malaysia, New Zealand and Hong Kong are all due to report CPI figures this week, while Japan will release trade data and Australia gets updates on business and consumer confidence.

The annual spring meetings of the World Bank Group and the International Monetary Fund take place in Washington.

Companies reporting this week include Bank of America Corp., Goldman Sachs Group Inc., International Business Machines Corp., Heineken NV and Unilever.

Here are the main moves in markets:

Stocks

The MSCI Asia Pacific Index dropped 0.4 percent as of 1:51 p.m. in Tokyo.

Australia’s S&P/ASX 200 fell 1 percent, the most in April. Raw-materials shares in the benchmark index have retreated 4.6 percent over the past two sessions, the biggest drop for that period in almost a year.

Hong Kong’s Hang Seng lost 0.9 percent and the Hang Seng China Enterprises Index slumped 1 percent. The Shanghai Composite fell 0.1 percent after tumbling 1.6 percent in the previous two sessions.

Japan’s Topix advanced 0.4 percent, trimming an earlier gain of as much as 1 percent. Indonesia’s benchmark jumped 0.7 percent. South Korea’s Kospi added 0.1 percent.

Futures on the S&P 500 slipped less than 0.1 percent. The index rose 0.9 percent on Monday, rebounding from a 1.1 percent loss last week. Trading in S&P 500 shares was 16 percent below the 30-day average.

Currencies

The yen declined 0.1 percent to 109.03 per dollar, after dropping 0.3 percent on Monday.

The Australian dollar fell 0.4 percent. In minutes of this month’s policy meeting released Tuesday, the Reserve Bank of Australia noted labor market conditions were “somewhat weaker than had been expected” and measures of underemployment “remained high.”

The Bloomberg Dollar Spot Index added less than 0.1 percent after falling 0.2 percent Monday to the lowest closing level since March 27.

Bonds

The yield on 10-year Treasuries fell less than one basis point to 2.25 percent, after rising one basis point from the lowest in about five months on Monday.

Australian benchmark yields rose one basis point to 2.49 percent.

Commodities

Gold fell 0.2 percent to $1,282.56 an ounce after declining for two days.

West Texas Intermediate was flat at $52.65 a barrel, after dropping 1 percent on Monday.

Iron ore futures on the Dalian exchange dropped 2.4 percent, after sliding almost 3 percent on Monday. The raw material for steel-making entered a bear market this month as a procession of analysts, Australia’s government and even some miners said gains to 2014 highs were unsustainable amid rising supply.