Asian stocks fell, with the regional benchmark retreating a fourth day, before a speech by Bank of Japan Governor Haruhiko Kuroda and monetary policy reviews from the U.S. to Europe this week. The yen held gains versus the dollar, while most metals and natural gas declined.
The MSCI Asia Pacific Index of regional equities sank 0.8 percent by 9:57 a.m. in Tokyo, headed for a 2 1/2-week low. The yen climbed 0.2 percent against the dollar, set for the strongest close since June 26 after posting the biggest jump of 16 major currencies tracked by Bloomberg last week. Malaysia’s ringgit weakened a fourth day. Standard & Poor’s 500 Index (SPX) futures were little changed after the gauge rose 0.1 percent July 26. Gold led precious metals lower, while copper dropped 0.3 percent. Natural gas futures (HIA) lost 2.3 percent.
The Federal Open Market Committee convenes July 30-31, with reports this week expected to show economic growth weakened in the second quarter and employers added fewer workers this month. The European Central Bank and Bank of England also meet this week, after both signaled earlier in the month that they will keep interest rates low. Japanese retail sales rose 1.6 percent from a year earlier in June, figures today showed, below the 2.1 percent estimate in a Bloomberg survey.
“It’s a big week with earnings reports, central bank meetings, and of course U.S. payrolls,” Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages more than $130 billion, said by phone. “Investors will be paying a lot of attention to these and studying the implications for Fed tapering arguments. Where markets go from here depends a lot on the data and the Fed.”
Global stocks touched a six-month low and the Chicago Board Options Exchange Volatility Index (VIX) reached the highest level since December last month amid speculation the Federal Reserve will start to reduce bond purchases this year that have buoyed the U.S. economy. Chairman Ben S. Bernanke and other Fed members have said any tapering will depend on a reduction in risks to the economic outlook and job market.
Japan’s Topix Index sank 1.7 percent, retreating a fourth day and poised for the lowest close since June 28 as rubber and power producers and mining companies led declines. South Korea’s Kospi (KOSPI) gauge fell 0.1 percent after gaining 2.1 percent last week. Australia’s S&P/ASX 200 Index (AS51) gained 0.1 percent.
The MSCI Asia Pacific measure is headed for a 3.1 percent advance in July. Kobe Steel Ltd., Komatsu Ltd., Daiwa Securities Group Inc., IDFC Ltd. and Reliance Capital Ltd. are among index members scheduled to report earnings today, data compiled by Bloomberg show.
The yen climbed to 98.01 per dollar and strengthened 0.2 percent to 130.23 per euro. Kuroda may use today’s address to get the “Nikkei-yen train back on track,” Steven Englander, managing director at Citigroup Global Markets Inc. in New York, wrote in a client note.
The euro was little changed at $1.3287. The New Zealand currency was steady at 80.85 U.S. cents. The price of taking a bearish view in the options market on the so-called kiwi has tumbled to the lowest level in 2 1/2 months after central bank Governor Graeme Wheeler said last week that monetary easing will probably need to be removed in the future, data compiled by Bloomberg show.
The Bloomberg Dollar Index, which tracks the greenback against 10 major peers, lost 0.1 percent today, after sliding 1 percent last week in a third week of declines.
The ringgit dropped 0.3 percent to 3.2172 per dollar, headed for the lowest close since June 24. Korea’s won strengthened a second day, adding 0.2 percent to 1,108.92 a dollar.
Futures on Hong Kong’s Hang Seng Index slipped 0.7 percent in their most recent trading session, while contracts on the China Enterprises Index of Chinese stocks traded in the city slid 0.9 percent. The Shanghai Composite Index of domestic equities gained 0.9 percent last week, as the Hang Seng added 2.8 percent.
Net income for Chinese industrial companies rose 6.3 percent from a year earlier in June, down from growth of 15.5 percent in May, data from the government statistician July 27 showed. The State Council, under Premier Li Keqiang, requested the National Audit Office conduct a review of government borrowings, according to a statement on the office’s website yesterday.
The Bloomberg China-US Equity Index of the most-traded Chinese stocks in New York added 0.3 percent July 26 to cap a 3.3 percent advance in the week.
The S&P 500 is headed for a 5.3 percent advance this month. The U.S. benchmark fell in June, after seven successive months of gains, as investors examined economic data for clues on when the Fed will start to reduce the $85 billion of monthly asset purchases.
The International Monetary Fund cautioned last week that the Fed exiting from its quantitative easing program could spur excessive interest-rate volatility and would have “adverse global implications.”
The Fed will start trimming its purchases in September, according to a Bloomberg survey of economists. Bernanke has said it is “way too early to make any judgment” as to whether policy makers will start tapering purchases in September.
U.S. gross domestic product probably rose 1 percent on an annualized basis in the second quarter, after gaining 1.8 percent in the previous period, data July 31 will show, according to the median of 73 economists’ estimates compiled by Bloomberg. A report today will show pending home sales contracted 1 percent in June, a separate survey showed. Sales rose 6.7 percent in May.
Employers added 185,000 workers in July, down from 195,000 in June, economists surveyed by Bloomberg predict before payrolls data due Aug. 2. The ECB will probably leave its benchmark rate at a record-low 0.5 percent, according to the median estimate of economists in another survey.
Investors are also watching company earnings reports to gauge the state of the economy. Of the 260 companies in the S&P 500 that have posted quarterly results, 73 percent have exceeded analysts’ estimates for profit and 57 percent have topped sales projections, data compiled by Bloomberg show.
Starbucks Corp. beat earnings forecasts last week while Expedia Inc. posted sales and profit that missed estimates. Companies including Procter & Gamble Co. and Exxon Mobil Corp. are set to report this week.
Yields on 10-year Treasuries were little changed at 2.56 percent. Australian government debt due in a decade yielded 3.75 percent, down three basis points, or 0.03 percentage point, while yields on Japanese 10-year notes were steady at 0.79 percent.
The MSCI Emerging Markets Index was little changed in early trading, after climbing 1.2 percent in a third week of gains last week.
Gold dropped 0.3 percent to $1,328.97 an ounce, falling a second day, while silver sank 0.5 percent, platinum lost 0.2 percent and palladium slipped 0.3 percent.
Speculation the Fed will hold back on easing stimulus is fueling wagers betting on a gold rally, with net-long positions up 26 percent as of July 23, U.S. Commodity Futures Trading Commission data show.
Copper for three-month delivery on the London Metal Exchange sank a third day, poised for the lowest close since July 10, as zinc and tin retreated at least 0.2 percent.
West Texas Intermediate crude was unchanged at $104.70 a barrel after slipping 0.8 percent July 26. Oil declined at the end of last week on speculation China’s plans to cut excess manufacturing capacity will reduce fuel consumption.
Gas futures retreated a fourth day. Contracts on rubber maturing in January declined 2.2 percent.
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