Asian stocks fell with European
equity-index futures as the U.S. dollar weakened against most major currencies and gold rose. Japanese bonds climbed while German-note
yields maintained near record lows.
Futures on the Euro Stoxx 50 Index slid 0.2 percent by 7:16 a.m. in London, while contracts on the Standard & Poor’s 500 were little changed as 30-year Treasury rates held near a 15-month low. The MSCI Asia Pacific Index retreated 0.2 percent as Japanese exporters slid on a stronger yen. Gold and silver rose a third day as the Bloomberg Dollar Spot Index slid 0.1 percent. The yield on 10-year Japanese government bonds dropped to a fresh 16-month low.
Bond yields from Spain to Germany reached all-time lows yesterday amid speculation the European Central Bank is preparing to boost stimulus. Russia said it was watching a build up of NATO troops near its border while the U.S. said Moscow may be directing separatist rebels in Ukraine. Chinese industrial-profit growth slowed to 13.5 percent in July, data today showed before Germany reports on inflation and the U.S. updates markets on economic growth.
“The global bond rally has gone a long way in quite a
short period of time, obviously driven by Europe and increased
speculation over measures from the ECB,” said Su-Lin Ong, head
of Australian economic and fixed-income strategy at Royal Bank
of Canada in Sydney.
“A discussion over both timing and what exactly those measures are going to be has dominated markets and set the tones for all markets globally.”
Yields on 10-year Australian bonds fell a fourth day, declining to 3.31 percent. New Zealand bonds due in a decade yielded 4.09 percent, down four basis points, or 0.04 percentage point. Ten-year Japanese government notes climbed, with the yield falling to 0.485 percent, the lowest level since April last year.
Europe Inflation
Euro-region inflation numbers are due tomorrow Aug 29, with policy makers next scheduled to review rates Sept. 4. The extra yield on Treasuries over their Group-of-Seven counterparts was 79 basis points yesterday, near the widest margin since June 2007.
Janet Yellen, FED Chair, who is already cutting off unprecedented U.S. stimulus measures, said on Aug. 22 that while slack remains in the labor market, the timeline for rate increases could be brought forward under the right circumstances.
An auction of $35 billion in five-year Treasury notes yesterday drew the highest demand in more than a year from an investor class including foreign central banks as the debt yielded nearly the most in nine years over its German equivalent. A two-year auction earlier in the week drew close to the highest yield in three years amid prospects the Fed may raise interest rates from zero sooner than investors predict.
Spain, Italy
Similar-maturity Treasury rates were little changed at 2.35 percent, after dropping four basis points in New York, while yields on 30-year debt held at 3.10 percent following a six basis-point drop yesterday to the lowest level since May last year.
Rates on 10-year bonds from Spain, Italy, Ireland and Germany dropped to records last session as data showed French factory confidence fell to a 13-month low and a measure of German consumer sentiment slid more than analysts predicted. The reports fueled bets ECB President Mario Draghi may introduce quantitative easing to stimulate growth and ward off deflation.
“Although the Bank of Japan and the Fed will move sentiment in markets globally, we are watching one bank and one bank only: the ECB,” Evan Lucas, a markets strategist in Melbourne at IG Ltd., wrote in an e-mail to clients.
Asia Stocks
The Topix slid 0.4 percent and the Nikkei 225 Stock Average sank 0.5 percent. The yen rose 0.1 percent to 103.78 per dollar after gaining 0.2 percent yesterday.
South Korea’s Kospi erased an earlier gain to close little changed. Samsung Electronics Co. added 1 percent. Apple Inc. failed again to win a sales ban on Samsung products found to infringe its smartphone patents, even after requesting what it described as a more limited prohibition.
Hong Kong’s Hang Seng Index fell 0.4 percent, falling a
third day, while a gauge of Chinese companies in the city
slumped 0.7 percent.
The Shanghai Composite Index slid 0.3 percent.
China’s statistics office said industrial-company profits expanded by 13.5 percent in July after a 17.9 percent increase in June that was the fastest rate of growth since September last year. New home-sales data in Australia fell 5.7 percent in July, while the Philippines said second-quarter gross domestic product jumped 6.4 percent from a year before, exceeding the 6.1 percent median projection of economists surveyed by Bloomberg.
Dollar Weakness
Gold gained 0.3 percent to $1,286.31 an ounce, while silver added 0.4 percent to $19.5313 per ounce. The Bloomberg Dollar Spot Index dropped a third day as the euro climbed 0.1 percent to $1.3204.
The British pound, Swiss franc, and the currencies of Australia, New Zealand, Denmark and Canada all climbed at least 0.1 percent.
Russia’s ruble retreated 0.2 percent to 36.2485 per dollar and 0.3 percent to 47.8705 per euro. The Micex Index in Moscow fell 0.6 percent.
Fighting in Ukraine’s eastern regions is spreading to formerly peaceful areas. A buildup of NATO forces near Russia’s border is unjustified and the country will do whatever is needed to ensure its safety from all threats, Interfax reported, citing Alexander Grushko, Russia’s ambassador to NATO.
