Stock Rally Eases; U.S. Dollar Recoups Some Losses: Markets Wrap

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Stock Rally Eases; U.S. Dollar Recoups Some Losses: Markets Wrap

(Bloomberg) — The stock rally spurred by signs the Federal Reserve is becoming more sensitive to market volatility faded some by Tuesday, with equities in Asia putting in a mixed performance as a rebounding dollar put pressure on emerging nations.

With traders awaiting fresh cues on U.S.-China trade negotiations and an address by U.S. President Donald Trump amid the federal-government funding impasse, futures on the S&P 500 Index showed muted gains Tuesday. Japan closed higher, though stocks slid in Korea and were little changed in Hong Kong. Treasuries were flat, while oil traded below $49 a barrel in New York. European stock futures advanced.

China’s benchmark repurchase rate fell to its lowest level since July 2016, as interbank liquidity became more abundant after last week’s move by the central bank to cut lenders’ required reserves. The softer dollar in recent days, care of Federal Reserve Chairman Jerome Powell’s signal of patience with regard to further monetary tightening, has helped limit pressure on China’s yuan even as Chinese rates drop. The yuan slipped Tuesday offshore, though remained in its recent trading range.Meantime, the outcome of U.S.-China trade negotiations hangs in the balance. American lawmakers are still unable to reach agreement on a budget, leaving parts of the federal government shut down for a third week. Trump gives a televised address Tuesday evening.

“Investors are happy to go with the positive trend in the current environment but remain wary of sharp downside reactions given the moves we’ve seen over the last few weeks and months,” Nick Twidale, chief operating officer at Rakuten Securities Australia, wrote in a note. “Traders are still very much aware that the various geopolitical factors that have been so prevalent in influencing market moves over the last 12 months are still relevant.”

Here are some events investors may focus on this week:

  • A U.S. delegation is in Beijing for trade talks with Chinese officials, the first face-to-face encounter since Trump and Xi agreed to a temporary truce on Dec. 1.
  • North Korea’s Kim Jong Un is visiting China ahead of a potential summit with President Donald Trump.
  • Wednesday sees the release of minutes from the Fed’s Dec. 18-19 policy meeting. Powell will speak to the Economic Club of Washington D.C. on Thursday.
  • Britain’s Parliament resumes a debate on the Brexit withdrawal bill, with Prime Minister Theresa May seeking to avoid defeat in a vote set for the week of Jan. 14.

These are the main moves in markets:

Stocks

  • Japan’s Topix index added 0.4 percent at the 3 p.m. close in Tokyo.
  • Australia’s S&P/ASX 200 Index rose 0.7 percent.
  • South Korea’s Kospi index fell 0.6 percent.
  • Hong Kong’s Hang Seng Index was little changed.
  • Shanghai Composite Index lost 0.3 percent.
  • S&P 500 futures gained 0.3 percent. The S&P 500 rose 0.7 percent Monday.
  • FTSE 100 Index futures rose 0.2 percent.
  • The MSCI Asia Pacific Index fell 0.2 percent.

Currencies

  • The yen lost 0.3 percent to 109 per dollar.
  • The offshore yuan fell 0.3 percent to 6.8640 per dollar.
  • The Bloomberg Dollar Spot Index rose 0.2 percent.
  • The euro traded at $1.1443, down 0.3 percent.
  • The pound was flat at $1.2775.

Bonds

  • The yield on 10-year Treasuries held around 2.70 percent.
  • Australia’s 10-year bond yield added three basis points to 2.30 percent.

Commodities

  • West Texas Intermediate crude was steady at $48.60 a barrel.
  • Gold fell 0.5 percent to $1,282.33 an ounce.
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