Stocks in Asia headed for a mixed start as a stronger yen looks set to weigh on Tokyo equity trading, where a rally Tuesday fizzled. U.S. stocks rose while the dollar fell with Treasury yields as investors await the keenly watched inflation report.
Futures on stocks in Japan pointed slightly lower, while contracts on Hong Kong’s benchmark climbed. Australian equities fluctuated at the open. The S&P 500 Index rose for a third day amid a rally in financial shares and food retailers. Assets seen as safe havens gained as volatility lingers, albeit down from the extremely elevated levels reached last week. Oil declined and gold maintained an advance.
While U.S. equities are recouping some of the $2 trillion wiped out in the rout last week, Japanese stocks are 10 percent below their January highs, with the Topix index trading at a four-month low. GMO’s James Montier said U.S. stocks were “obscenely overvalued,” citing the Shiller price-earnings ratio, which shows that U.S. stocks are at the second-most-expensive level ever, topped only by the technology bubble of the late 1990s. He also referenced a recent Bank of America Merrill Lynch survey showing the highest level ever of fund managers saying the market suffers from “excessive valuation.”
American consumer-price data due Wednesday could give some clues on where markets are heading, with investors assessing the outlook for inflation and what it means for the trajectory of U.S. monetary policy. Treasury yields have surged this year and Goldman Sachs Asset Management said 10-year yields could rise to as high as 3.5 percent in the next six months as the market prices in a steeper pace of Federal Reserve tightening.
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Here are some important things to watch out for this week:
- Japan’s economy probably expanded for an eighth straight quarter, but at a slower pace on rising imports and reduced housing investment. Consensus is for annualized growth of 1 percent in the final three months of 2017, compared with 2.5 percent in the third quarter, data Wednesday is expected to show.
- The Bank of Thailand will probably hold its benchmark rate at 1.5 percent on Wednesday, according to economists surveyed. Inflation, already below the target range, is slowing further on the stronger baht.
- Lunar new year celebrations for the Year of the Dog begin, affecting China, Hong Kong, Taiwan, Singapore, Malaysia and Indonesia. Chinese mainland markets are closed Feb. 15-21.
- The U.S. consumer-price index probably increased at a moderate pace in January, economists project. Retail sales in the U.S., also out Wednesday, probably increased for a fifth straight month.
- Earnings season continues in full swing with reports including companies from Bunge to Nestle.
These are the main moves in markets:
- Futures on Japan’s Nikkei 225 Stock Average slid 1.9 percent.
- Australia’s S&P/ASX 200 Index rose 0.1 percent.
- Futures on Hong Kong’s Hang Seng Index advanced 0.5 percent.
- The S&P 500 rose 0.3 percent.
- The Stoxx Europe 600 Index fell 0.6 percent.
- The Bloomberg Dollar Spot Index sank 0.4 percent to the lowest in more than a week.
- The euro was little changed after climbing 0.5 percent to $1.2355.
- The yen was steady at 107.83 per dollar, near a five-month high following a 0.8 percent rally.
- The yield on 10-year Treasuries fell three basis points to 2.83 percent.
- Australia’s 10-year yield fell more than one point to 2.86 percent.
- West Texas Intermediate crude slipped 0.5 percent to $58.87 a barrel.
- Gold was little changed at $1,329.85 an ounce following a 0.5 percent gain.
— With assistance by Tom Redmond