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Stocks Extend Rebound on Earnings-Season Optimism: Markets Wrap

Bloomberg.com — Stocks in Asia tracked a strong U.S. session after earnings handed investors a welcome distraction from rising yields and trade tensions. The dollar ticked higher and Treasuries were steady.

Japanese, Chinese and Australian shares rose, helping lift the MSCI Asia Pacific Index of shares, which last week touched its lowest since May 2017. Chinese shares fluctuateds. Earnings cheer continued after the U.S. close, with profit at Netflix Inc. trouncing estimates. Ten-year Treasury yields traded around 3.16 percent. Oil edged higher amid simmering tensions between the Saudi Arabia and the U.S. over the disappearance of a prominent journalist. Hong Kong markets shut for a holiday Wednesday.

Better results at the start of earnings season from the likes of Goldman Sachs Group Inc., Johnson & Johnson and Netflix offered investors some breathing space from worries about the jump in benchmark Treasury yields to seven-year highs. Minutes from the latest Federal Reserve meeting should offer more clues Wednesday on the outlook for policy tightening into next year. Also helping sentiment this week was a budget agreement in Italy.

“The earnings that came through overnight definitely is something the market has been waiting for to really change the sentiment,” Jingyi Pan, IG Asia Market Strategist, told Bloomberg Television. “But nevertheless, as we move into the final quarter of the year and into 2019, the sentiment remains to be seen.”

Dollar, Yields Tick Higher; Stocks Lack Direction: Markets Wrap

Bloomberg.com — Stocks outside of Japan traded mixed Tuesday as the dollar inched higher alongside Treasury yields. The yen retreated and U.S. equity index futures advanced.

Japan’s shares outperformed Asian equities as the yen declined. Hong Kong and Chinese shares retreated, while Australia advanced amid thin volumes in most of the region. European futures signaled a muted open. The dollar edged up from close to a two-week low ahead of a U.S. Treasury currency-manipulation report expected this week. Oil ticked higher amid tensions between Saudi Arabia and the U.S. over the disappearance of a prominent journalist, while gold held gains.

Traders are grappling with continuing U.S.-China trade war rhetoric and geopolitical strains, while trying to gauge the direction of the American economy and third-quarter earnings results. Investors are looking for any signal from corporates hinting of a slowdown or stronger growth that could affect the pace of Federal Reserve rate hikes. Bank of America Corp. dropped in New York Monday after posting results, while earnings from Goldman Sachs Group Inc. are due Tuesday.

Elsewhere, the New Zealand dollar jumped after inflation beat all economist estimates. The Turkish lira was set for an eighth day of gains after the country released U.S. pastor Andrew Brunson on Friday.

Stock Slump Resumes in Asia; Pound Drops, Oil Up: Markets Wrap

Bloomberg.com — A rebound in global equities Friday saw no traction at the start of the week, with markets in Asia dropping on Monday. The pound slipped as a Brexit deal hung in the balance with just days to go until a critical deadline.

Equities in Japan, Hong Kong and Australia bore the brunt as a risk-off mood returned in choppy trading, following a weekend of warnings on global economic fragility from finance chiefs meeting at an annual IMF gathering. China’s stocks fluctuated near a four-year low. International Monetary Fund Managing Director Christine Lagarde advised to be ready for more market volatility, speaking after the worst sell-off in global stocks since February. China’s ambassador to the U.S., in a rare American Sunday TV appearance, said his nation didn’t want a trade war but will respond.

Treasuries nudged higher amid the cautious tone in markets, with the yield on the 10-year benchmark slipping to 3.15 percent. The yen pushed higher alongside gold prices. Oil climbed amid rising tensions between the U.S. and Saudi Arabia over a missing journalist.

The gloomy remarks over the weekend contrasted with the modest recovery in stocks that was staged Friday, when news on U.S. bank earnings helped cool anxiety that corporate profits might not live up to lofty expectations. Goldman Sachs, Morgan Stanley and Netflix are among those reporting this week. Also to come: minutes from the Federal Reserve’s latest policy meeting due on Wednesday, with investors keen to follow the debate on projections for further interest rate rises.

“Investors are now trying to decide how they should accurately price growth,” Fabiana Fedeli, Robeco’s global head of fundamental equities, said on Bloomberg TV in Hong Kong. “Now the key question investors are having is ‘am I really paying the right price for this growth because we think earnings are fantastic, but what’s going to happen ahead, are they still going up to the extent valuations would imply?”’

The pound fell as a surprise Sunday visit to Brussels by U.K. Brexit Secretary Dominic Raab failed to break the deadlock. People familiar with the situation said there were signs of progress, but officials on both sides played down the chances of an imminent agreement and denied a Politico report that a deal was done.

Stocks Attempt Recovery as Treasury Yields Climb: Markets Wrap

Bloomberg.com — Most Asian stocks recovered Friday after the biggest sell-off in global equities since February, as U.S. stock futures extended gains and Treasury yields ticked higher. The dollar steadied and the yen gave back some of its recent gains.

The MSCI Asia Pacific Index climbed from the lowest level since May 2017, with shares in Hong Kong and South Korea leading the way. While benchmarks in Tokyo struggled for traction, shares in Shanghai staged a modest rally and European equity futures climbed. The yuan retreated, and was the worst-performing currency in Asia Friday after a weaker-than-forecast daily fixing. That followed a Bloomberg report that U.S. Treasury staff concluded that China isn’t manipulating its exchange rate.

On Thursday in the U.S., tech shares, which bore the brunt of the selling Wednesday, fared less badly as key benchmarks tumbled in excess of 2 percent for a second day.

Investors ascribed a number of reasons for the retreat in equities this week, including worries over the U.S.-China trade war and increasing preoccupation with the risk the American economy is nearing the end of an extraordinarily prolonged expansion. Remarks by Federal Reserve Chairman Jerome Powell last week that the central bank is “a long way” from a neutral level of interest rates also fed into sentiment.

“Folks are re-rating whether the Fed is going to tighten too much — I think that’s the fear,” said Michael Arone, chief investment strategist at State Street Global Advisors in Boston. Even so, “nothing’s really changed in terms of the Fed’s path, and I think the economy continues to be quite strong,” Arone said, concluding that investors “have had a violent overreaction.”

President Donald Trump made clear in remarks over the past two days that his take is the Fed is to blame for sending the S&P 500 to a three-month low. Next up for investors will be to assess corporate earnings for the third-quarter. JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. kick off the season for U.S. banks on Friday.

Back in Asia, Singapore’s dollar advanced after the central bank tightened its policy stance as anticipated on Friday. Traders will be watching the yuan after the report that U.S. Treasury staff advised Secretary Steven Mnuchin that China isn’t manipulating the currency , as the Trump administration prepares to issue a closely watched report on foreign currencies.

Elsewhere, West Texas oil recovered, while still heading for the biggest weekly drop since July.

Stock Rout Rolls Through Asia; Dollar Slides: Markets Wrap

Bloomberg.com — The biggest stock sell-off since February rolled from the U.S. through Asia on Thursday, with benchmarks from Tokyo to Hong Kong seeing declines in excess of 3 percent. The dollar weakened against all major peers while the yen pushed higher and most emerging-market currencies sunk.

Treasuries, which helped trigger the stock decline when 10-year yields hit the highest since 2011, held gains posted Wednesday. China’s Shanghai Composite gauge tumbled more than 5 percent at one point and is set to close at a four-year low. Taiwan’s technology-heavy TWSE Index plummeted more than 6 percent in the region’s worst performance. European equity futures pointed to significant declines. Behind the rout: fresh news of damage to corporate earnings from the trade war, along with intensifying pressure from the global shift away from monetary stimulus.

U.S. futures extended losses from Wednesday when the Nasdaq 100 Index tumbled more than 4 percent for its worst day in seven years. Earlier, U.S. industrial and construction supplies distributor Fastenal Co. added to angst that the trade conflict with China is raising materials costs that will crimp profit margins, while French luxury goods maker LVMH confirmed China is enforcing customs rules more strictly.

Ten-year Treasury yields slipped to 3.15 percent, down from the seven-year high of 3.26 percent reached on Tuesday. Yields have been climbing under the influence of a shrinking Federal Reserve bond portfolio and expectations for further interest-rate hikes. President Donald Trump, who has claimed credit for record U.S. stock levels, said after the U.S. market closed that the Fed is making a “mistake” and “has gone crazy.”

“The sharp rise in U.S. 10-year yields has caused investors to suddenly reprice the impact of moving from post-crisis low yields to a rising rate environment,” Eleanor Creagh, an Australian market strategist at Saxo Capital Markets in Sydney, said by email. “We have the global growth engines, price of energy rising, price of money rising and quantity of money falling combined with the ongoing trend of deglobalization which has started to impact markets and the cracks are showing.”

Just a day before the start of America’s third-quarter earnings season, signs are mounting that companies might not be able to deliver the runaway growth that’s bolstered equities so far in 2018. Investors have long fretted that the trade war would crimp profits, and now a group of companies is warning that is happening at the same time that rising bond yields lift the cost of borrowing.

“Earnings are really important because that was part of the concern that sparked the sell-off,” Darrell Cronk, president and chief investment officer at Wells Fargo Investment Institute, told Bloomberg TV in New York. “The concern heading into the third quarter earnings season is about how much trade and tariffs will dent earnings.”

Trump also said the stocks decline was “a correction that we’ve been waiting for for a long time,” after being briefed on the market turmoil. Treasury Secretary Steve Mnuchin said he’s not surprised the market is having “somewhat of a correction.”

Gauges of equity volatility in Japan and Australia rose more than 40 percent after Wall Street’s “fear gauge,” as the Cboe Volatility Index, or VIX, is known, soared the most since February.

“This is the new paradigm for all of us to get used to,” Tom Essaye, founder of The Sevens Report, said on Bloomberg Radio. “Those of us who have been in the markets for a couple of decades now, you see the Dow down 1,000 points, you think ‘my God, the Dow’s down 1,000 points,’ but we saw this at the beginning of the year, and this is the new market that we have. It’s algo-driven. There are very few real people involved in these types of moves. As such we just have to get used to more volatility on these types of days.”

Elsewhere, West Texas Intermediate crude fell back below $73 a barrel as Hurricane Michael threatened to slash fuel demand across the U.S. Southeast.

Asian Stocks Mixed as Treasury Yields Stabilize: Markets Wrap

Bloomberg.com — Asian stocks traded mixed Wednesday as yields on Treasuries retreated from a seven-year peak. The dollar edged lower against major peers.

Shares in Japan rose after four days of losses while those in China reversed gains. Hong Kong stocks outperformed with their South Korean counterparts lagging after a holiday. Earlier, the S&P 500 Index was dragged down by materials shares, after a profit warning in the sector, while technology shares rebounded from a three-day rout. Treasuries steadied with the yield on the 10-year benchmark little changed at 3.21 percent, while the greenback remained under pressure after President Donald Trump said the Federal Reserve is moving too fast with interest-rate hikes.

Asian investors are assessing increasingly attractive valuations against a backdrop of deepening U.S.-China tensions and a surge in volatility for stock and bond markets. Bear markets for equities in China and Hong Kong contrast with American equities that remain near to all-time highs. China’s yuan remains weak after steps this week from authorities to spur lending in the economy. New lending and money-supply data, due as soon as Wednesday, will be closely watched as Beijing strives to support flagging growth.

Elsewhere, American crude held near $75 a barrel as Hurricane Michael curtailed offshore oil production and the IEA issued a warning to the global market. The pound nudged up as the Times reported a group of between 30 and 40 Labour members of parliament will defy Jeremy Corbyn and endorse a less hard-line proposal to prevent a no-deal Brexit.

U.S. Yields Hit Seven-Year High; Asia Stocks Mixed: Markets Wrap

Bloomberg.com — Ten-year U.S. Treasury yields hit a fresh seven-year high as they resumed trading after a holiday, posing a fresh test of investor appetites for riskier assets. Stocks in Asia were mixed, with China’s stock sell-off easing alongside a slump in Japanese shares.

Stocks in Shanghai were little changed after the biggest sell-off in more than three months, as investors weighed increasingly attractive valuations against deepening U.S.-China tensions. The yuan gained in onshore trading after sliding on Monday. A stronger yen left Japanese stocks under pressure. European equity futures tipped a muted open. The IMF’s first reduction in its outlook for global growth since 2016 underscored headwinds to stocks going forward — particularly outside the U.S., which continues to benefit from tax cuts.

The S&P 500 Index closed little changed Monday after reversing a slide, while the Nasdaq 100 Index fell to the lowest since August. The U.S. bond market was closed due to the Columbus Day holiday. Traders are now gearing up for $230 billion of Treasury auctions this week following last week’s sell-off.

China’s equities remained in focus after overseas investors dumped $1.4 billion of domestic Chinese shares through exchange links with Hong Kong Monday. Traders are on watch for whether the so-called national team of state-linked funds helps to prop up Chinese shares. Casting a cloud over Chinese assets has been festering tensions with the U.S., with the Treasury Department weighing whether to name China a currency manipulator.

U.S. Secretary of State Michael Pompeo had a testy exchange with Chinese officials during his trip to Beijing, which — unlike a visit in June — didn’t feature a meeting with President Xi Jinping.

“If the trade confrontation continues, the Chinese currency will go lower and that will create a whole host of problems for the global economy,” said Alicia Levine, chief strategist at BNY Investment Management.

Elsewhere, oil traded in New York advanced toward $75 a barrel. Iron ore futures in Dalian jumped to the highest level in almost three weeks on demand. South Korea’s market is closed for a holiday Tuesday. Brazil’s stocks rallied after far-right Army captain and investor favorite Jair Bolsonaro took a commanding lead in the first round of the nation’s presidential election. In Europe, Italy’s 10-year bond yield ratcheted up to a four-year high and banking stocks sold off as the populist government refused to bow to European Union criticism over its planned budget.

Stocks Decline; Yuan Weakens as PBOC Eases Policy: Markets Wrap

Bloomberg.com — China paced declines in Asian stocks and the yuan fell as investors assessed the latest move by the People’s Bank of China to loosen monetary policy. Chinese shares bore the brunt of selling as traders returned from a week-long holiday that encompassed the rout in Treasuries.

Equities from Sydney to Shanghai sank, while Japan was shut for a holiday, and Columbus Day in the U.S. means no Treasuries trade on Monday. European equity-index futures ticked lower. U.S. stocks on Friday capped the worst week in a month, as a solid run of economic data emboldening investor faith for tighter monetary policy spurred a sell-off in Treasuries. The yuan dropped past 6.9 per dollar in the offshore market and was also weaker onshore following PBOC’s policy move. The higher U.S. Treasury yields helped the dollar gain against most major peers, while the euro and yen dropped.

China’s central bank cut the amount of cash lenders must hold as reserves for the fourth time this year, as policy makers seek to shore up the economy amid a worsening trade war. In the U.S., the sell-off in Treasuries that took 10-year yields to 3.25 percent last week will take a breather due to the public holiday, though debate continues as to whether this will become a more significant stumbling block for the bull run in equities. JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. kick off earnings season for U.S. banks on Friday.

The decline in the U.S. unemployment rate to a 48-year low on Friday, in addition to major upward revisions to prior months’ data, added to speculation the Federal Reserve has ample reason to keep pushing up borrowing costs. Elsewhere, West Texas Intermediate oil prices slid below $74 a barrel. Aluminum tumbled after Norsk Hydro ASA reversed a decision to close the world’s biggest alumina refinery, adding to supply issues.

Brazilian assets may extend last week’s rally after Jair Bolsonaro, who is favored among investors, led the first round of presidential elections with more votes than polls forecast ahead of a second-round vote on Oct. 28 that may catapult him to victory.

There’s also been a souring of sentiment on technology shares amid an escalating face-off between the world’s two-largest economies. A gauge of IT stocks in Asia traded at the lowest level since July 2017 it hit on Friday as investors digested a Bloomberg News report that China had infiltrated American companies with a hardware hack three years ago.

Stocks Slide on Treasury Yield Worries, Tech Rout: Markets Wrap

Bloomberg.com — U.S. stocks fell the most since June and volatility spiked higher as the rout in Treasuries that took yields to multiyear highs fueled a repricing of risk assets.

The S&P 500 dropped to a three-week low, with nine of the 11 main sectors retreating. High-dividend-yielding stocks dropped after the 10-year yield poked above 3.2 percent for the first time in seven years. Technology shares fell the most, with the Nasdaq 100 Index notching its worst day since June following Bloomberg’s report that China infiltrated American companies with hardware hacks. Higher rates lifted financial firms.

The bond rout rippled through global financial markets even as Treasuries stabilized Thursday. Emerging-market shares sank the most since February, European government bonds fell and commodities from crude to copper tumbled. The Turkish lira led developing-nation currencies lower, closely followed by Russia’s ruble.

“This withdrawal of liquidity and gradual tightening of monetary policy” is reverberating across financial markets, Bob Baur, chief global economist at Principal Global Investors, said in an interview with Bloomberg Television. “We look for 10-year Treasury yields to hit 3.5 at some point — later this year, early next year — and I think that’s going to be a real problem for stock markets.”

Data underscoring the strength of the American economy sparked the Treasury selloff, sending yields higher fast enough to spook equity investors who had pushed stocks toward records on the heels of the new Nafta agreement. Fed Chairman Jerome Powell stoked rate worries when he said the central bank could eventually boost its benchmark past the neutral level.

Adding to the rising risk sentiment were growing signs of strain in U.S.-China relations that could exacerbate the trade war. Along with the hacking report, Vice President Mike Pence laid out allegations of Chinese election interference in a harshly worded speech, and Alibaba co-founder Jack Ma warned the tariff dispute will destroy commerce.

“It has to do with this story about the hacking,” Matt Maley, equity strategist, at Miller Tabak + Co, said. “This is going to raise the stress in the trade tensions with China. China is very important to a lot of these tech cos.”

The bond slump likely also reflects the growing impact of the world’s major central banks stepping back from stimulus. The ECB this month cut monthly asset purchases in half, while the Fed balance sheet unwind continues. Meanwhile, resurgent commodity prices are raising the prospect of a fresh tailwind to inflation.

In credit, borrowing costs have been advancing amid the Treasury slump. Global investment-grade corporate bond yields rose to the highest since July 2012, Bloomberg index data show. The instability may have affected Europe’s primary market as two borrowers pulled bond sales.