Asian bonds to stocks decline on US economy as copper rallies
The MSCI Asia Pacific Index dropped 0.3% and Standard & Poor’s 500 Index futures slipped 0.2%
Wellington: Asian bonds fell, with yields on Australian 10-year notes headed for a 17-month high, while stocks snapped a six-day advance as evidence the US economy is gaining momentum boosted speculation stimulus will be reduced. Copper and gold gained as most metals rose.
Yields on Australian notes due in a decade rose eight basis points to 4.16% by 11:02 am in Sydney, set for the highest close since March, 2012. Japanese yields also climbed as 10-year Treasury rates held near a two-year high. The MSCI Asia Pacific Index dropped 0.3% and Standard & Poor’s 500 Index futures slipped 0.2%. Copper rose for the first time in three days, while nickel jumped 0.6%. The Australian dollar and South Korean won strengthened.
US payrolls data on Friday may add to signs the job market is improving, fueling bets the Federal Reserve will reduce bond purchases this month after reports on Thursday showed service industries grew at the fastest pace in eight years and jobless benefit claims fell more than economists predicted. At the Group of 20 summit in Russia, emerging-market leaders cautioned that cuts to developed-nation stimulus could stoke global volatility.
Payrolls is a very important number because it is the number that Fed policy is benchmarked against, Peter Esho, chief market analyst at Invast Securities Co. in Tokyo, said by phone. A discussion around employment is going to drive the outcome of the Fed’s meeting later this month.
Kiwi bonds
Japanese 10-year government bonds fell a sixth day to yield 0.79%, up one basis point today, or 0.01 percentage point. Rates on similar-maturity New Zealand notes climbed four basis points to 4.75% as 10-year Treasury yields dropped one basis point to 2.98%, after closing at 2.99% on Thursday, the highest since July 2011.
Japan’s Topix Index fell 0.7%, retreating for the first day this week and trimming a weekly advance of 3.9%, the most since the start of July. Australia’s S&P/ASX 200 Index lost 0.4%, falling 0.2% in the week. The MSCI Asia Pacific gauge is still up 2.1% this week, set for the steepest jump since the five days to 12 July.
The yen gained 0.2% to 99.96 per dollar, after depreciating 0.4% on Thursday to the weakest close since 24 July. The currency also climbed versus the euro, adding 0.2% to 131.13 after gaining 0.3% on Thursday.
Fed outlook
The number of workers on nonfarm payrolls in the US probably increased 180,000 in August, compared with a gain of 162,000 for July, according to the median of 94 economists’ estimates compiled by Bloomberg. The Fed’s next meeting will be held Sept. 17-18, with 65% of economists surveyed by Bloomberg last month predicting a reduction in its record asset- purchase program.
The data will inform markets as to the timing and degree of Fed tapering, David Croy, head of markets research in Wellington at ANZ Bank New Zealand Ltd., wrote in a note to clients today. Any disappointment would see the dollar sold heavily.
The Bloomberg US Dollar Index, which tracks the currency against 10 major peers, lost 0.1% on Friday after jumping 0.5% in New York. The gauge has climbed 0.3% this week, poised for a fourth week of gains.
Claims for US unemployment benefits declined by 9,000 to 323,000 in the week ended 31August, less than the lowest estimate of economists surveyed by Bloomberg. Another report showed companies boosted employment by 176,000 workers in August, according to the ADP Research Institute.
Services index
The Institute for Supply Management’s non-manufacturing index rose to 58.6 in August from 56 the prior month, topping the median forecast in a Bloomberg survey for a drop to 55. A reading greater than 50 indicates expansion in the industries that make up almost 90% of the economy.
Another report yesterday showed orders placed with US factories fell less than forecast in July as rising fuel prices propelled the biggest gain in non-durable goods in a year.
Australia’s dollar gained 0.2% to 91.38 US cents on Friday, headed for a 2.7% climb against the greenback this week. The currency is posting the biggest weekly gain among major counterparts after the central bank held rates at a record low and data showed gross domestic product rose more than economists estimated last quarter.
The New Zealand dollar has also strengthened this week, climbing 2.3% for the third-biggest jump among 16 major currencies tracked by Bloomberg, after Brazil’s real. The currency, known as the kiwi, rose 0.2% to 79.03 cents on Friday. The won gained 0.2% to 1,096.60 a dollar.
BRICS fund
The MSCI Emerging Markets Index was little changed after jumping 1.1% on Thrusday. The gauge of developing-nation stocks has climbed 1.9% so far this week, set for the biggest jump since the second week of July.
Brazil, Russia, India, China and South Africa, known collectively as the BRICS, pledged on Thrsday in St. Petersburg to create a $100 billion pool of currency reserves to guard against market shocks.
Nations paring back and exiting monetary easing policies pose a major challenge to the world economy, Chinese vice finance minister Zhu Guangyao said Thursday. Russian President Vladimir Putin said in his opening remarks that countries exiting unconventional stimulus will impact other economies and take a toll on key global risks. US President Barack Obama said the pullback will be gradual.
Copper, gold
Copper for three-month delivery on the London Metal Exchange rose 0.6%, boosting the metal’s weekly advance to 0.7%. Nickel’s gains brought its increase in the week to 0.2%, while aluminum added 0.4% on Friday and zinc gained 0.6%. Gold climbed 0.3%, trimming its second weekly drop to 1.7%.
West Texas Intermediate crude oil fell 0.2% to $108.19 a barrel after rallying 1.1% on Thursday. Brent crude futures declined 0.2% to $115.04 a barrel.
A US government report on Thursday showed that inventories in Cushing, Oklahoma, the delivery point for the contract, dropped to the lowest level in a year and a half. The US senate foreign relations committee also voted 10-7 in favor of a resolution authorizing limited action against Syria. BLOOMBERG
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