Asia Stocks Open Mixed as Politics, Trade Dominate: Markets Wrap

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Asian stocks were off to a muted start Tuesday after U.S. stocks slipped on growing concern about the outlook for global trade and American politics. The dollar held recent gains as 10-year Treasury yields consolidated above 3 percent, and oil traded at a four-year high.

Equity benchmarks were little changed in Japan, which returned from a holiday, and Australia. China’s markets also will resume trading after long weekend, while markets in Hong Kong and South Korea are shut Tuesday. Industrial shares led the S&P 500 Index lower after China warned it won’t meet with American officials unless they stop threatening to expand tariffs. Reports that Deputy Attorney General Rod Rosenstein will leave his post also weighed on stocks.
An uptick in political tensions and the escalation in the U.S.-China trade dispute are testing global equities, which have posted two strong weeks of gains in part due to optimism that the global economy can weather any potential tariffs. Coming up this week is the Federal Reserve’s policy meeting, which will likely see interest rates increased for the third time this year and will feature fresh projections for the policy rate over the next few years.

“What will be more interesting will be to find out” the number of rate hikes anticipated for next year, Iain Stealey, portfolio manager at JPMorgan Global Strategic Bond Fund, who expects two Fed rate hikes this year and two in the first half of 2019, said on Bloomberg TV. “Inflation is above target, so they can keep going on this sort of slow normalization. I don’t see them stopping unless we see a pickup in trade rhetoric which actually does impact the overall economy.”

Elsewhere, euro sovereign bond yields jumped as European Central Bank President Mario Draghi predicted a pickup in underlying inflation. Brent crude climbed above $80 a barrel as OPEC and its allies signaled less urgency to boost output despite U.S. pressure. The pound maintained gains on increasing talk of a second U.K. referendum on the final Brexit deal.
Source : Bloomberg