Stocks in Asia Stall; Yuan Pares Post-PBOC Gains: Markets Wrap

Bloomberg.com — Equities in Asia pared gains on Wednesday as investors continued to fret about the next step in the trade tussles between the U.S. and China. The dollar fell and China’s yuan pared gains triggered by further moves to stabilize the currency.

The region’s equity benchmarks gave up some earlier advances, with shares in China pacing a retreat. Japan erased gains as the yen rose. Stocks in Hong Kong also reversed an increase, while Australia bucked the trend. European equity index futures signaled a softer open to trading. Treasury yields were steady.

Adding to previous moves to ease pressure on the currency, the People’s Bank of China urged some lenders to prevent any “herd behavior” and momentum-chasing moves in the currency market, according to people familiar with the matter. Japanese bond yields nudged higher as a summary of opinions from policy makers at the Bank of Japan’s July 30-31 meeting showed one member had wanted freedom for yields to move up and down by around 0.25 percent on either side of the zero percent target.

Trade tensions remain in focus as the U.S. said it will begin imposing 25 percent duties on an additional $16 billion in Chinese imports in two weeks. It will be the second time the U.S. slaps duties on Chinese goods in about the past month, despite complaints by American companies that such moves will raise business costs and eventually consumer prices. Meanwhile, China’s exports grew faster than expected in July and imports surged, underscoring solid demand at home and abroad despite the uncertainty of the trade tensions.

Trade is the biggest risk in terms of sentiment, said Kerry Craig, global markets strategist at JPMorgan Asset Management in Melbourne.

“We don’t expect it to fade any time soon and we do think it’s a big worry about the sentiment it creates in the markets,” Craig said.

Elsewhere, the Turkish lira declined. The New Zealand dollar jumped on higher outlook for inflation as well as robust Chinese export growth. Australia’s dollar made little headway after the central bank chief said inflation was expected to reach its target in 2020.