Asia Stocks Set to Edge Lower After U.S. Drop: Markets Wrap

(Bloomberg) -- Stocks in Asia looked set for modest declines after the S&P 500 Index dropped to its lowest since April, as investors grappled with signs of some key economies slowing against a backdrop of uncertain trade conditions.

A rough end to last week showed no signs of reversing early Monday as U.S. equity futures opened lower with stocks in Australia and most Asian equity futures slipping. Treasuries gained with the yen on Friday when U.S. stocks tracked global declines amid concern over the health of world economic growth. The dollar is coming off the back of a strong week that took it to the highest in a month. Oil remains below $52 in New York as traders weigh the implications of softer demand for 2019. Japanese bonds are in focus as a recent slide in yields threatens to push the benchmark 10-year bond yield below zero percent.

With global growth forecasts for 2019 being questioned amid the U.S.-China trade tussle, investors may get some clues on the policy path from this week’s Federal Reserve meeting and press conference from Chairman Jerome Powell. That’s the last key event scheduled as global equities round out what’s been the worst year since 2011, on course to drop about 9 percent amid concern surrounding the earnings outlook.

“There’s been a reevaluation of growth and inflation prospects over 2019 with the trade war now looking extremely negative,” Steve Goldman, fund manager at Kapstream Capital, told Bloomberg TV in Sydney. “We’re going to see a lot of volatility.”

This weekend brought further changes at the Trump administration. Interior Secretary Ryan Zinke will leave at the end of the year amid a swirl of federal investigations. Next on the list could be Homeland Security Secretary Kirstjen Nielsen, and the president has also mused about replacing Commerce Secretary Wilbur Ross, people familiar said.

Investors will keep monitoring Brexit developments after Theresa May’s team pushed back against reports they are warming to a second referendum on Brexit. David Lidington, her effective deputy, and Chief of Staff Gavin Barwell rejected the idea of another vote after newspapers reported they’d held talks on the issue. The U.K. prime minister will face Parliament on Monday.

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Coming Up

• The Federal Reserve holds its final policy meeting of 2018 on Tuesday and Wednesday. The rate decision will be followed by a press conference with Chairman Jerome Powell.
• The Bank of Japan’s monetary policy decision is due Thursday, followed by a briefing from Governor Haruhiko Kuroda.
• Chinese President Xi Jinping marks the 40th anniversary of Deng Xiaoping’s opening of the nation’s economy to the world with a keynote speech at a conference scheduled for Tuesday.
• A partial U.S. government shutdown could start this week if lawmakers and President Trump fail to resolve how much money to allocate for Trump’s wall along the Mexican border.

And these are the main moves in markets:

Stocks

• Futures on Japan’s Nikkei 225 fell 0.8 percent late Friday.
• FTSE China A50 futures dipped 0.1 percent.
• Hang Seng futures added 0.5 percent.
• Australia’s S&P/ASX 200 slid 0.1 percent.
• Futures on the S&P 500 slid 0.2 percent. The S&P 500 Index fell 1.9 percent on Friday.

Currencies

• The yen held at 113.33 per dollar.
• The offshore yuan was steady at 6.8985 per dollar.
• The Bloomberg Dollar Spot Index jumped 0.3 percent on Friday to the highest in over a month.
• The euro bought $1.1306.
• The pound was flat at $1.2590.

Bonds

• The yield on 10-year Treasuries dipped two basis points to 2.89 percent on Friday.
• Australian 10-year bond yield slipped two basis points to 2.44 percent.

Commodities

• West Texas Intermediate crude added 0.3 percent to $51.35 a barrel.
• Gold slipped 0.1 percent to $1,237.25 an ounce.

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