By Adam Haigh & Pratish Narayanan - Jun 17, 2013 4:49 AM GMT+0400
Most Asian stocks rose while the yen and South Korea’s won weakened as investors awaited this week’s Federal Reserve meeting and weighed prospects of a reduction in U.S. economic stimulus. Natural gas rallied.
The MSCI Asia Pacific Index of regional equities climbed 0.1 percent by 9:44 a.m. in Tokyo, asJapan’s Topix Index added 0.4 percent. South Korea’s Kospi Index sank 0.2 percent and Australia’s S&P/ASX 200 Index slid 0.8 percent. Standard & Poor’s 500 Index futures jumped 0.3 percent. The yen weakened against the greenback after rallying the most since July 2009 last week and the won lost 0.2 percent. Crude slid 0.2 percent as natural gas futures gained 0.7 percent. Copper rose.
The Shanghai Composite Index slid 2.2 percent last week and traded at 8.83 times estimated earnings June 13, the cheapest level since December. Photographer: Qilai Shen/Bloomberg
Almost $3 trillion has been erased from global markets since Fed Chairman Ben S. Bernanke said May 22 U.S. policy makers could curb stimulus should the job market improve. The Federal Open Market Committee meets this week. TheS&P 500 (SPX) fell 0.6 percent June 14, sliding 1 percent in the week, after the International Monetary Fund cut its forecast for U.S. economic growth in 2014 to 2.7 percent from 3 percent and said any tapering of Fed support needed to be handled properly.
“The key event, front and center, for markets is going to be the FOMC rate decision this week, you are bound see some volatility until then,” Chris Green, an Auckland-based strategist at First NZ Capital Ltd., a brokerage and wealth management firm, said by phone. “The Fed will probably make some comments to calm the volatility we’ve seen. It’s likely to stick to the September timeframe for withdrawing some stimulus, but if there’s any indication that the Fed will withdraw stimulus sooner than expected, then we will see a big reaction.”
Emerging Markets
The MSCI All-Country World Index was little changed after falling 0.4 percent last week. MSCI’sEmerging Markets Index slipped 0.2 percent after sliding 2.8 percent in the five days to June 14, the fifth losing week and the longest stretch of declines in a year. The MSCI Asia Pacific gauge excluding Japan retreated 0.3 percent.
All 37 economists surveyed by Bloomberg News predict U.S. borrowing costs will be kept in a zero to 0.25 percent range June 19. The Fed won’t announce a tapering of its bond buying program this week, though Bernanke is unlikely to backtrack from his message that continued improvement in labor markets may allow for a reduction in the central bank’s quantitative easing programs, Barclays Plc strategists led by Rajiv Setia, head of U.S. rates research in New York, wrote in a June 14 note.
The yen weakened 0.3 percent to 94.58 per dollar and lost 0.5 percent to 126.19 per euro. Bank of Japan Governor Haruhiko Kuroda refrained from extending the maturity of loans to banks last week as part of the regulator’s easing program. The Dollar Index (SPGSCI) was little changed at 80.666 today. The won slipped to 1,128.18 per dollar.
Aussie, Kiwi
The Australian dollar jumped 0.4 percent to 96.06 U.S. cents, while New Zealand’s currency added 0.3 percent to 80.74 cents. Consumer confidence in the South Pacific nation rose to a three-year high this quarter, according to a gauge compiled by Westpac Banking Corp. and McDermott Miller Ltd.
Crude retreated to $97.66 a barrel, after rising to a four-month high at the end of last week. The S&P GSCI Spot Index of commodities closed little changed last week at 631.24.
Concern central banks will curb stimulus as economies improve spurred hedge funds to cut wagers on a rally in gold prices for the first time in three weeks by June 11. Net long positions on the metal fell by 4.1 percent to 54,779 futures and options, U.S. Commodity Futures Trading Commission data show. Gold futures gained 0.3 percent last week to $1,387.60 an ounce.
‘Wait and See’
Investors have been watching U.S. data to assess whether the recovery in the world’s largest economy is strong enough to warrant a scaling back of the easing programs. Bernanke is scheduled to speak after the two-day FOMC meeting June 19.
“U.S. growth and policy expectations remain a key driver,” Michael Kurtz, head of global equity strategy at Nomura Holdings Inc., Japan’s largest brokerage, wrote in an e-mail. “Lower trading volumes betray a growing wait-and-see approach by many investors, with focus now on the upcoming FOMC” meeting.
Consumer confidence in June eased from a six-year high as progress in the labor market supported Americans’ views on the economic outlook. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment declined to 82.7 in June from 84.5 the prior month that was the highest since July 2007, a report June 14 showed. The median forecast in a Bloomberg survey was unchanged at 84.5.
China Bets
Industrial production, which measures output at mines and utilities in addition to factories, was unchanged in May after a revised 0.4 percent drop the previous month.
The Shanghai Composite Index (SHCOMP) slid 2.2 percent last week and traded at 8.83 times estimated earnings June 13, the cheapest level since December. Options traders are paying the most in two months to protect against declines in the iShares FTSE China 25 Index fund, the largest Chinese exchange-traded fund in the U.S. on concern a local cash crunch will hinder the recovery in Asia’s largest economy, data compiled by Bloomberg show.
Stocks in the United Arab Emirates fell the most in a week yesterday as concern the Syrian civil war may escalate hampered investor sentiment across the Middle East. Dubai’s DFM General Index slipped 2.3 percent.
To contact the reporters on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net; Pratish Narayanan in Singapore at pnarayanan9@bloomberg.net
To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net
