Asia Stocks Drop as China Losses Deepen; Yen Falls

EghtesadOnline: Asian stocks fell as losses in Chinese equities deepened, following weakness in the U.S. amid worse-than-expected corporate earnings. The pound held gains triggered by the surprise news of a U.K. election.

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19 April 2017

Equity markets from Sydney to Hong Kong and Seoul posted declines of at least 0.5 percent. A Chinese gauge of small-cap shares headed for its lowest close since September 2015. The yen weakened while the pound remained near its strongest level this year ahead of a parliamentary vote for an election on June 8. The yield on Japan’s benchmark 10-year government note touched zero. Zinc, aluminum and iron-ore prices rose, according to Bloomberg.

Uncertainty coupled with weaker-than-expected results from heavyweights IBM and Goldman Sachs Group Inc. has pushed some investors away from riskier assets like stocks and into havens including Treasuries and the yen. A vote in Britain will be preceded by the French presidential election, while a standoff over North Korea’s nuclear weapons program drags on.

Here’s what investors are watching:

The first round of voting in France starts this weekend. Theresa May will Wednesday ask the House of Commons to support her call for a June general election.

Final euro area inflation figures for March are out Wednesday.

Morgan Stanley will publish earnings Wednesday. Akzo Nobel NV will also report results and may outline its plan to counter the $24 billion takeover attempt by PPG Industries Inc.

The Fed’s Beige Book will provide more color on the U.S. economy.

Here are the main moves in markets:

Stocks

The Shanghai Composite Index fell 1 percent to the lowest level since February as of 12:51 p.m. in Tokyo. The gauge is down 3.4 percent over four days. The ChiNext gauge of small-cap shares headed for its lowest close since September 2015.

The Hang Seng Index slid 0.7 percent, while the Hang Seng China Enterprises Index dropped 1 percent to below the 10,000 level for the first time in two months.

Japan’s Topix index was little changed. The MSCI Asia Pacific Index retreated 0.4 percent.

Australia’s S&P/ASX 200 Index lost 0.7 percent and South Korea’s Kospi index fell 0.5 percent.

Futures on the S&P 500 rose 0.1 percent after the underlying gauge slipped 0.3 percent Tuesday. IBM slumped in after-hours U.S. trading after its 20th consecutive quarterly sales decline.

Currencies

The yen slipped 0.1 percent to 108.58 per dollar, after gaining 0.5 percent on Tuesday. The Bloomberg Dollar Spot Index rose 0.1 percent, following a two-day decline.

The pound was steady at $1.2831 after its 2.2 percent surge Tuesday. The euro was also little changed.

The South Korean won was little changed, erasing an earlier advance.

Bonds

The yield on 10-year Treasuries rose one basis point to 2.18 percent after an eight-basis-point plunge Tuesday.

The yield on similar-dated Japanese bonds declined one basis point to zero, while the yield on Australian notes due in a decade slid four basis points to 2.45 percent.

Commodities

London Metal Exchange zinc for delivery in three months rebounded, advancing 0.8 percent to $2,547 per metric ton. Aluminum, copper, lead and nickel all rose.

Iron ore put the brakes on its decline, rising 1.7 percent after losing 8 percent in the first two days of the week.

Gold declined 0.2 percent to $1,286.65 an ounce.

West Texas Intermediate crude oil dropped 0.2 percent to $52.30 a barrel, after falling for two days.