Asia Stocks Face a Mixed Start After U.S. Rebound: Markets Wrap

(Bloomberg) -- Asian stocks were poised for a mixed end to a rough week following an afternoon rally in their U.S. counterparts that erased most of the day’s losses. Investors continue to mull the prospects for a pause in Federal Reserve tightening and the outlook for U.S.-China trade talks.

Futures edged higher for equities in Japan and China, while Hong Kong contracts pointed to a lower start. Australian shares opened flat. Futures on the S&P 500 Index were little changed after the U.S. equity market recovered the bulk of the day’s declines on Thursday, though still ended lower. Ten-year Treasury yields fell for a fifth consecutive session, though finished above their intraday lows. The dollar was mixed overnight, rising against the Aussie and kiwi while dropping versus the yen and Swiss franc on haven demand.

Financial markets remained on tenterhooks amid worries that the trade truce between China and the U.S. won’t last after the arrest of Huawei’s chief financial officer. As traders start to doubt the Fed will raise rates in 2019, JPMorgan Chase & Co. CEO Jamie Dimon said that while the focus has been on the Fed moving too quickly, there’s also a risk that the Fed does too little, too slowly.

Market-implied U.S. rate expectations for next year edged below a quarter point last week, and have crumbled this week amid the slide in global equities and U.S.-China trade tension. Vanguard, in its annual forecast out Thursday in the U.S., said the central bank will stop hiking next summer.

“Up until recently there had been no real alternative to equities and today there’s a better option -- cash,” Savita Subramanian, head of U.S. equity and quantitative research at Bank of America Merrill Lynch, told Bloomberg TV. “You’ve got the cost of capital across the spectrum starting to increase. That’s what we need to recalibrate our whole existential outlook to.”

Elsewhere, oil continued to be a drag on financial markets, with West Texas Intermediate back below $52 a barrel as OPEC ended talks without a deal on oil production cuts for the first time in nearly five years. Energy producers in the S&P 500 sank and emerging-market equities plunged.

Some of the key events investors will be focused on this week:

• OPEC ministers meet again in Vienna Friday.
• Friday brings the U.S. monthly employment report for November.
• China November trade data are due on Saturday.

And here are the main moves in markets:

Stocks

• Futures on Japan’s Nikkei 225 added 0.4 percent in Singapore.
• Hang Seng futures fell 0.9 percent overnight.
• FTSE China A50 Index futures rose 0.3 percent.
• Australia’s S&P/ASX 200 Index gained less than 0.1 percent.
• Futures on the S&P 500 added 0.1 percent. The S&P 500 fell 0.2 percent on Thursday.
• The Stoxx Europe 600 sank 3.1 percent.
• The MSCI Emerging Market Index slumped 2.3 percent.

Currencies

• The yen held at 112.67 per dollar.
• The offshore yuan was at 6.8794 per dollar.
• The Bloomberg Dollar Spot Index fell 0.3 percent Thursday.
• The euro bought $1.1378.
• The pound traded at $1.2782.

Bonds

• The yield on benchmark 10-year Treasuries fell two basis points to 2.89 percent Thursday. The two-year note yield dropped three basis points to 2.76 percent.
• Australian 10-year government bond yields rose one basis point to 2.46 percent.

Commodities

• West Texas Intermediate crude added 0.4 percent to $51.70 a barrel.
• Gold held at $1,238.02 an ounce.
• LME copper fell 1.7 percent to $6,070 per metric ton.

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