Market news

Bloomberg.com — Asian stocks dropped as investors weighed continuing concerns in Indonesia and India and strength in commodity prices. The euro climbed on reports the Italian government trimmed its budget-deficit plans.

The regional Asia Pacific share index fell for a third day, with Japan leading declines. The rupiah and the rupee both remained under pressure on surging oil prices. The Australian dollar fell briefly as weak building data fanned concerns of a slowdown. Italian bonds may recover from four days of selling after the government signaled it’s bowing to pressure from the European Union to trim a budget-deficit target. Crude oil futures steadied in New York above $75 a barrel, near the highest level in almost four years.

Italian assets remain volatile as the country’s budget confrontation with the EU raised the risk of a debt crisis. The euro rose after the Corriere della Sera reported Italy’s draft budget plan will pledge to cut the deficit to 2 percent in 2021, reversing the government’s initial proposal. The yield on 10-year Italian government bonds touched the highest level in more than four years Tuesday. In the U.S., retailers slipped after Amazon.com raised the minimum wage for all its employees, with the S&P 500 Index edging lower.

Investors remain on edge this week with the market impact of European politics and emerging market strains still high on the agenda. A close call between a U.S. and a Chinese warship in the disputed South China Sea in recent days added to tensions between two countries already embroiled in an escalating trade war. Meanwhile, Treasury yields remained near the top of the recent range as Federal Reserve Chairman Jerome Powell welcomed increases in Americans’ wages while expressing confidence that low unemployment won’t spur a takeoff in prices that would force him to hike interest rates more aggressively.

Elsewhere, the pound traded near three-week lows after Boris Johnson won cheers at the U.K. Conservative Party’s annual conference with an attack on Theresa May’s Brexit plan, but stopped short of calling for her to be removed as prime minister. In India, focus is back on the country’s financial sector after Prime Minister Narendra Modi’s government took control of Infrastructure Leasing & Financial Services Ltd., promising to end the group’s string of defaults.

Bloomberg.com — The euro dropped on mounting uncertainty about Italy’s fiscal position, and the dollar pushed higher as emerging-market currencies slid. Stocks in Asia were mixed.

The common currency weakened after the head of Italy’s lower house budget committee said the nation would have solved its fiscal problems with its own currency. European futures declined alongside their U.S. counterparts. Japan’s Nikkei 225 Stock Average ticked higher a day after closing at its highest since 1991. Stocks in Hong Kong underperformed as traders returned from a long weekend, and equities also fell in Australia and South Korea. China’s markets are shut.

Global investor sentiment remains fragile, even after a deal between the U.S. and Canada to revamp the Nafta bloc with Mexico. Bank of America Merrill Lynch analysts joined JPMorgan Chase & Co. in downgrading forecasts for the Chinese yuan and other Asian currencies in recent days.

Sino-American tensions remain in focus after the Chinese navy dispelled an American missile destroyer from waters near South China Sea islands, in China’s account of the incident. Meantime, political drama in Washington still swirls around President Donald Trump’s Supreme Court nominee, which may feed through to November congressional elections and affect the outlook for the administration’s agenda.

Elsewhere, oil consolidated around its highest in almost four years as a slowdown in U.S. drilling adds to concern over supply losses from Iran and Venezuela. Indonesia’s rupiah fell past 15,000 per dollar for the first time since 1998 a day after inflation came in slower than forecast, giving the central bank less cause to raise interest rates further.

Bloomberg.com — U.S. equity futures, Canada’s dollar and Mexico’s peso all climbed as American and Canadian negotiators reached a deal to preserve a three-way trade bloc with Mexico. There was little follow-through to other markets, with Asian trading thinned by holidays.

Japanese shares were mixed, though the Nikkei 225 Stock Average managed to close at its highest level since 1991. FTSE 100 futures tipped a modest drop in U.K. stocks. Contracts on the S&P 500 Index indicated it will extend its advance after the best quarter since 2013. Oil gained on concern of an impending supply crunch. U.S. 10-year Treasury yields ticked higher, to 3.07 percent.

The loonie climbed to its strongest since May against the greenback after American and Canadian representatives announced a trade deal to be known as the U.S. Mexico Canada Agreement, or USMCA, revamping the old Nafta framework. The move is the latest feather in the cap for U.S. trade negotiator Robert Lighthizer, who has advocated a tough line towards China, compared with Treasury Secretary Steven Mnuchin.

In Asia, volumes were below normal in a number of markets Monday, with Labor Day in Australia, Hong Kong shut and China out through Oct. 7.

Elsewhere, Tesla shares will be in focus after Elon Musk reached an agreement with the SEC. The billionaire gets to keep his job as CEO but must resign as chairman for three years.

Bloomberg.com — Asian stocks rounded out a volatile month with gains on Friday, with Japan’s Nikkei 225 Stock Average approaching its highest since 1991. Italy’s assets will be in focus after the country’s government set a wider budget deficit than some investors had anticipated.

The yen slide to the weakest level this year helped stoke Japanese shares, and equities advanced from Sydney to Shanghai in Asia. U.S. stock futures were little changed ahead of economic data including consumer spending, income and inflation. Treasuries and the dollar were little changed. Italian bonds opened lower after Italy set a 2.4 percent budget-deficit target.

“This is a disappointing risk-off outcome, but lies in the grey zone rather than red zone in terms of escalation of stress to dangerous levels,” Krishna Guha, head of central-bank strategy at Evercore ISI in Washington, wrote in a note on the Italian budget.

In Tokyo, investors are still watching whether the Bank of Japan tapers purchases of super-long bonds in its plan for October, out Friday afternoon.

Elsewhere, oil rose a day after the U.S. Energy secretary ruled out tapping the Strategic Petroleum Reserve, compounding concerns that sanctions on Iran will tighten markets.

Bloomberg.com — Stocks in Asia fell Thursday as investors took in the likelihood of further Federal Reserve interest-rate increases stretching into next year. The euro fell on a report that Italy may postpone a meeting on its 2019 budget plan.

Japanese stocks led declines along with shares in Hong Kong and China after a muted start to the trading day in the aftermath of the Fed’s rate decision. European equity futures suggested a weaker open to European trading. U.S. 10-year yields held declines and the greenback rose as the Fed’s statement provided fodder for differing viewpoints.

The euro dropped – and Italian stocks will be in focus – after the newspaper Corriere della Sera reported that Italy’s cabinet may not meet Thursday to decide on 2019 budget targets, due to new complications in reaching agreement on the deficit.

The S&P 500 Index closed lower, with the bulk of losses coming in the final 20 minutes of trading. U.S. equities had earlier gained after the central bank suggested inflation remained tepid, only to reverse as Chairman Jerome Powell said the Fed could raise rates past the perceived neutral level.

The Fed’s statement handed ammunition to hawks and doves alike as investors parsed the language for clues on monetary policy. After most U.S. markets closed, President Donald Trump said he was “not happy” about the rate increase. Next up are two key Asian central bank policy decisions, in Indonesia and the Philippines. Both may raise rates, the former to deal with a balance of payments crisis and the latter in response to surging inflation.

“The market forecast a 99 percent probability of a 25 basis points hike and there has therefore not been a significant reaction to the Fed’s announcement today,’’ said Larry Hatheway, chief economist at GAM Investments. “Investors must be mindful that at some point the Fed will inevitably become more ambiguous in its forward guidance, making, in our view, the trajectory for U.S. rates progressively more difficult to read.”

Elsewhere, crude erased earlier losses after U.S. Energy Secretary Rick Perry said the nation’s strategic oil reserves won’t be tapped to expand global supplies.

Bloomberg.com — European stocks drifted and Asian shares edged higher alongside U.S. equity futures as markets largely entered a holding pattern before the Federal Reserve’s rate decision. The dollar was steady and U.S. Treasury yields hovered near the seven-year highs reached in May.

The Stoxx Europe 600 Index traded sideways as a slump in automakers weighed on the gauge. Japan’s Topix index erased virtually all of the days losses to end just below its highest point in almost eight months. Stocks rallied in Hong Kong as traders returned from a holiday, while Chinese shares rose after MSCI Inc. said it’s considering increasing the weight of the equities in its global indexes from next year. The pound showed little reaction after Theresa May doubled down on her Brexit stance, while Italian bond yields edged up as the anti-establishment Five Star Movement threatened to block the country’s 2019 budget unless spending is ramped up.

While investors are treating another Fed rate hike as all but certain on Wednesday, the outlook for future policy as signaled by the dot plot and any comments from Jerome Powell will be key to whether bond markets extend their recent selloff. Ten-year Treasury yields of 3.09 percent are just below their year-to-date peak, while two-year yields are at a decade high.

“The U.S. domestic economy is trotting along nicely; the rest of the world is not in the same place and there’s no doubt that global investor caution is continuing to increase as the trade war between the U.S. and China appears to be heating up,” Nick Twidale, chief operating officer at Rakuten Securities Australia, wrote in a note. “Analysts will be watching closely to see if the Fed acknowledges this and its potential impact on the U

Elsewhere, the New Zealand dollar climbed even with news that the country’s monthly trade deficit hit the widest on record; traders instead focused on a rebound in business confidence from a 10-year low. South Korea’s markets were closed for a holiday. Brent stabilized near a four-year high, while metals were mixed and range bound.

Bloomberg.com — Stocks traded mixed in Asia Tuesday as investors pondered concerns about the outlook for global trade and American politics. The dollar ticked higher as 10-year Treasury yields consolidated above 3 percent, and oil traded at a four-year high.

Equities climbed to the highest since February in Japan as traders returned from a holiday, though Chinese shares headed in the opposite direction after a long weekend. Australia was little changed. Hong Kong — where stocks fell Monday on escalating trade tensions — and South Korea are shut Tuesday. European equity-index futures flagged a muted open to trading there. The pound pared some of the gains made on Monday when the currency was buoyed by increasing talk of a second U.K. referendum on the final Brexit deal.

The S&P 500 Index ended lower Monday after China warned it won’t meet with American officials unless they stop threatening to expand tariffs. Reports that Deputy Attorney General Rod Rosenstein will leave his post also weighed on U.S. stocks.

An uptick in political tensions and the escalation in the U.S.-China trade dispute are testing global equities, which have posted two strong weeks of gains in part due to optimism that the global economy can weather any potential tariffs. Coming up this week is the Federal Reserve’s policy meeting, which will likely see interest rates increased for the third time this year and will feature fresh projections for the policy rate over the next few years.

“What will be more interesting will be to find out” the number of rate hikes anticipated for next year, Iain Stealey, portfolio manager at JPMorgan Global Strategic Bond Fund, who expects two Fed rate hikes this year and two in the first half of 2019, said on Bloomberg TV. “Inflation is above target, so they can keep going on this sort of slow normalization. I don’t see them stopping unless we see a pickup in trade rhetoric which actually does impact the overall economy.”

Elsewhere, Brent traded above $80 a barrel as OPEC and its allies signaled less urgency to boost output despite U.S. pressure. The Indonesian rupiah and India’s rupee led declines among Asian currencies as U.S. Treasury yields climbed and the spike in oil prices undermined sentiment toward countries with current-account deficits.

Bloomberg.com — Stocks in Hong Kong fell with U.S. equity futures and the Australian dollar after China called off planned trade talks with U.S. officials, potentially triggering an escalation in the protracted tariff war between the world’s two-biggest economies.

While the yen erased an early advance Monday, the Australian and New Zealand dollars remained lower as a new round of tariffs between the U.S. and China came into effect. Volumes across Asia were lower than average due to holiday closures in the largest markets, China and Japan.

Most of the action was centered in Hong Kong, where stocks sank. Real-estate developers were under pressure amid concern they may suffer a potentially devastating blow to their biggest source of financing. Bank-to-bank borrowing costs jumped the most since December 2008 in Hong Kong as liquidity tightened ahead of forecasts for hikes to the underlying rate for the first time in more than a decade.

The escalation in U.S.-China trade tensions will test two strong weeks of gains for Asian equities that lifted stocks off this year’s lows in part due to optimism that economies can weather the hit from trade restrictions. JPMorgan Chase & Co. said it’s starting to factor into its strategy a growing potential for a “Phase III” of the trade war next year affecting all Chinese imports, which would lead to weaker Chinese growth and hit U.S. stocks.

Next up this week is the Federal Reserve’s policy meeting that will likely see interest rates increased for the third time this year, with markets increasingly pricing for another one in December.

Attention remains on India after the central bank and regulator said they were closely monitoring recent developments in the country’s financial markets and were ready to take “appropriate actions.” Financial shares were battered on Friday when volatility suddenly erupted in Asia’s best-performing stock market this year.

Elsewhere, oil rose above $71 a barrel after OPEC gave the cold shoulder to U.S. President Donald Trump’s demand that it take rapid action to reduce oil prices. Metals declined, led by copper, amid the trade war. The Hong Kong dollar advanced for a third straight day as banks are seem likely to raise interest rates if the Fed hikes this week.

Bloomberg.com — Stocks in Asia are set to cap the strongest two-week rally since February as investors take in evidence that escalating trade tensions have yet to hurt global growth and China’s moves to support its expansion.

With the world’s expansion intact — as shown in strong Japanese and Korean export figures this week — the narrative of central banks paring back liquidity remains. The Bank of Japan cut its purchases of super-long bonds at an operation Friday, and Hong Kong’s dollar surged the most since 2003, thanks in part to the prospect for higher interest rates there. Japan’s Topix Index closed at the highest since May, and shares climbed from Seoul to Shanghai. Ten-year U.S. yields are holding above 3 percent, though that’s not helping the dollar, which is approaching levels against the yen not seen since January.

The jump in the Hong Kong dollar against the greenback left heads scratching Friday, with the pegged-currency’s move lacking any obvious immediate trigger. Analysts cited a catalog of explanations, from stop losses and upcoming holidays to expectations for higher rates, given that the city boosts borrowing costs in lockstep with the Federal Reserve, which is projected to tighten again next week.

Also buoying risk appetite this week has been a rally in emerging market assets from stocks to currencies, with some investors deciding the recent sell-off left valuations too juicy to ignore. For example, Goldman Sachs Asset Management said this week its buying Turkish and Argentinian government debt.

“Fundamentals in many places are very strong, particularly the U.S.,” Grant Forster, Principal Global Investors’s chief executive officer for Australia, told Bloomberg TV in Sydney. “We don’t expect this to really derail U.S. growth at all,” he said, referring to the trade dispute.

China’s stocks are having their best week since June, though the Shanghai Composite remains in bear-market territory. Premier Li Keqiang this week pledged tax cuts and help for smaller companies to support growth, and the country’s planning agency indicated it would strengthen infrastructure plans.

In Japan, news that the BOJ is trimming purchases of debt maturing in more than 25 years helped boost 20-year and 30-year government bond yields. While the BOJ kept its stimulus policy unchanged earlier this week, the move adds to signs that the easy-money era is ending. Norway’s central bank Thursday hiked rates for the first time in seven years.

The Australian dollar was steady after S&P Global Ratings bumped its outlook for the country’s AAA debt rating to stable from negative. West Texas crude dipped toward $70 a barrel as U.S. President Donald Trump resumed his criticism of OPEC on Twitter. The Organization of Petroleum Exporting Countries and its allies are due to meet in Algiers this weekend.

Meantime, Friday’s U.S. equity session could be lively, with traders bracing for quadruple witching — when futures and options on indexes and individual stocks expire — and the largest revision to the Global Industry Classification Standard since 1999. More on that here.