Yen Gains, Asia Stocks Stall on Trump Nafta Remark

EghtesadOnline: Donald Trump grabbed investors’ attention in an otherwise listless Asian trading session, with the yen rising and S&P 500 Index futures slipping with the Mexican peso as the U.S. president said he may end the North American Free-Trade Agreement.

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23 August 2017

Some of the earlier risk-on trade was unwound, with the dollar pulling back after Trump also threatened to shut down the U.S. government if he is unable to get funds to build a wall along the Mexican border. Asian stocks stalled, with benchmarks coming off their highs in Tokyo and declining in Sydney and Shanghai. Hong Kong’s trading session was canceled for the day as a typhoon buffeted the city.

According to Bloomberg, Asian shares struggled to make headway following gains on Wall Street on Tuesday on optimism the Trump administration is making progress on tax reform. Instead, traders assessed the prospects of the administration to advance its agenda as the U.S. president addressed a rally of his supporters in Phoenix designed to put behind him criticism following his response to violence in Charlottesville.

“His comments on the Nafta negotiations once again brings the general direction toward obstructing free trade and raises concerns over its impact on global trade,” said Hideyuki Ishiguro, a senior strategist at Daiwa Securities Co. in Tokyo.

There is little top-tier economic data out this week and volumes are being kept low by the Northern Hemisphere summer. The focus turns to the annual conference of global central bankers that kicks off in Jackson Hole, Wyoming, on Thursday with sentiment among investors that global policy makers seem reluctant to tighten liquidity. Geopolitical events continue to hover in the background. The U.S. tightened its financial restrictions on North Korea, slapping sanctions on Chinese and Russian entities it accused of assisting Pyongyang’s development of nuclear weapons and ballistic missiles.

Among other key events looming this week:

In Asia on the economic front on Wednesday: Malaysia and Singapore July CPI, and Taiwan July industrial production.

European Central Bank President Mario Draghi gives a speech in Germany on Wednesday with investors looking for any clues on how the central bank will proceed with its asset purchase program. Minutes from the Governing Council’s July meeting released last week showed that officials are uncertain how to signal changes in their policy settings.

Combined sales of new (data Wednesday) and previously owned (Thursday) U.S. homes probably edged up in July from the prior month, indicating a still robust real estate market held in check by rising property prices, economists forecast.

Here are the main moves in markets:

Stocks

Japan’s Topix index rose 0.5 percent, while the Kospi index fluctuated and Australia’s S&P/ASX 200 Index declined 0.3 percent. The Shanghai Composite Index lost 0.4 percent.

Futures on the S&P 500 Index fell 0.1 percent as of 12:10 p.m. in Tokyo. The underlying measure jumped 1 percent on Tuesday amid reports the Trump team and lawmakers may be making progress toward pro-business reforms.

The MSCI Asia Pacific Index advanced 0.2 percent.

Currencies

The yen turned around to rise 0.1 percent to 109.46 per dollar. It lost 0.5 percent on Tuesday.

The Mexican peso lost 0.3 percent to 17.7167 per dollar.

The kiwi lost 0.4 percent to 72.52 U.S. cents and the Australian dollar dropped 0.2 percent to 78.95 U.S. cents after the government’s announcement a month before a general election.

The Bloomberg Dollar Spot Index was little changed, reversing a gain of as much as 0.1 percent.

The euro was trading at $1.1762.

Bonds

The yield on 10-year Treasuries was little changed at 2.21 percent.

The Australian 10-year bond yield climbed about three basis points to 2.67 percent.

Commodities

West Texas Intermediate crude rose 0.1 percent to $47.68.

Gold added 0.1 percent to $1,286.11 an ounce after a 0.5 percent decline.