U.S. markets were closed Monday for the Presidents Day holiday.
European stocks traded mixed in closing trade after earlier gains as U.S. markets were closed for a public holiday. The Stoxx Europe 600 and the FTSE 100 rose 0.1%, the DAX traded flat and the CAC 40 fell 0.16%. “Earlier gains for European indexes have been chipped away this afternoon, as concerns about interest rates and the ongoing Ukraine conflict sapped risk appetite,” IG analyst Chris Beauchamp wrote. Previously, markets were cautiously optimistic that central banks could be nearing the end of their interest-rate rise cycles but stronger data has reversed that view, he said.
Japanese stocks were lower, dragged by falls in electronics stocks, as uncertainty persisted over policy tightening by central banks and its implications for the global economy. Investors were focusing on the yen, bond yields and any-policy related developments. USD/JPY was at 134.33, compared with 134.09 as of Monday’s Tokyo stock market close. The Nikkei Stock Average was down 0.2% at 27472.59.
South Korea’s benchmark Kospi fell 0.3% to 2447.78 in morning trade as electronics and internet stocks retreated. Preliminary trade data for the first 20 days of February show that the country is set to post another monthly trade deficit on sluggish exports of semiconductors and smartphones. Foreign and institutional investors were net sellers.
Hong Kong’s benchmark Hang Seng Index opened 0.1% lower, ahead of another busy stretch of U.S. economic data releases, which could give investors signals on the Fed’s next move. Property stocks extended Monday’s gains, leading advances on the HSI.
Chinese stocks were mixed, extending the market’s rangebound pattern in recent weeks. The benchmark Shanghai Composite Index rose 0.3% to 3301.30 and the Shenzhen Composite Index was up 0.4% at 2169.88. The ChiNext Price Index edged down 0.1% to 2478.98. Huaxi Securities analysts said the market is likely to continue consolidating and trading sideways in the near term, as investors slow buying activities after aggressively adding positions at the beginning of the year. But in the longer run, the trend of China’s macroeconomic improvement and equity-valuation rebound likely remains on track, Huaxi said. The recent downward correction could present buying opportunities, Huaxi added.
Asian currencies consolidated against the USD in the Asian morning session, but may weaken on continued concerns over Fed tightening. These worries haven’t gone away, said Philip Wee, senior FX strategist at DBS Group Research, in an email. After the strong U.S. nonfarm payrolls and CPI readings recently, markets are bracing for another surprise in this Friday’s U.S. PCE data, Wee said. The PCE Price Index is the Fed’s preferred measure of inflation. USD/KRW was little changed at 1,296.25 while USD/SGD edged 0.1% higher to 1.3370 and AUD/USD was down 0.1% at 0.6901.
Gold edged higher in early Asian trade with focus on the FOMC minutes due later this week. The market is now pricing in a 25 basis point rate hike at each of the next three FOMC meetings, DailyFX’s senior strategist Nick Cawley said in a note. “If the FOMC minutes show that there was support for a 50bp hike at the last meeting, these market expectations may move higher still, boosting bond yields and the US dollar and weighing on the price of gold,” he added. Spot gold was 0.1% higher at $1,842.40/oz.
Oil prices were mixed in early Asian trade, as traders continue to weigh worries over geopolitical tensions against hopes of a reopening-driven recovery from China supporting demand. “The geopolitical backdrop is adding uncertainty,” ANZ analysts said in a note, adding that Israel’s prime minister has blamed Iran for an attack on an oil tanker in the Persian Gulf. “The U.S. is also planning new export controls and a fresh round of sanctions on Russia, targeting the defense and energy sectors,” they added. Relations between Washington and Beijing have also been increasingly tense lately after the U.S. shot down a Chinese balloon in its territory earlier this month. Front-month WTI rose 0.7% to $77.07/bbl; front-month Brent fell 0.6% to $83.26/bbl.