Asia Stocks Mixed as Bonds Gain, Yen Soars

The reflation trade rally that sent global equities soaring to the highest level on record was cut short during Asian hours as the yen jumped and Treasuries climbed for the first time in five days.

Stocks in Tokyo fell while the dollar slipped against most major currencies. The yield on 10-year Treasuries retreated after reaching 2.50 percent on Wednesday. Investors are questioning how much further equities can climb after the MSCI All-Country World Index closed at an all-time high. Evidence of firming U.S. inflation had spurred bets that the economy can withstand higher interest rates as it waits for stimulus from the Trump administration.

World equities have jumped in value to more than $70 trillion after a rally since Donald Trump’s election that has been spurred by optimism for stronger U.S. economic growth. A technical indicator showed MSCI’s broadest measure of global equities might have become overbought, while a volatility gauge for the S&P 500 increased the most since January on Wednesday.

Wednesday’s data lifted the odds for a Fed rate hike in March to 42 percent from 30 percent two days ago, helped by Fed chair Janet Yellen’s testimony that the central bank doesn’t need to wait for Trump to outline plans on fiscal stimulus before resuming rate hikes. U.S. year-on-year inflation reached 2.5 percent for January, the fastest pace since 2012.

Before Yellen’s testimony, traders had anticipated the Fed would start raising U.S. borrowing costs in June. Now they see one as early as May, according to futures data compiled by Bloomberg. Data this week also showed factory price increases accelerated in China.

Here are the main moves in markets:

Stocks

· The MSCI Asia Pacific Index rose 0.4 percent as of 3:21 p.m. in Tokyo, though more stocks fell than rose.

· Japan’s Topix fell 0.2 percent while Australia’s S&P/ASX 200 Index rose 0.1 percent. New Zealand’s S&P/NZX 50 Index dropped 1.1 percent from the highest level since October.

· Hong Kong’s Hang Seng climbed 0.4 percent to the highest level since September. The Hang Seng China Enterprises Index added 0.2 percent, reaching the highest since November 2015 with banks leading the way.

· Futures on the S&P 500 fell 0.1 percent after the benchmark index rose 0.5 percent and the MSCI All-Country World Index added 0.6 percent on Wednesday.

Currencies

· The yen rose 0.3 percent to 113.87 per dollar, after snapping a 0.9 percent decline on Wednesday.

· The Bloomberg Dollar Spot Index lost 0.1 percent after halting a four-day advance on Wednesday.

· The Aussie was little changed after climbing 0.6 percent on Wednesday. The unemployment rate unexpectedly fell in January, despite a plunge in full-time jobs, underscoring the mixed picture of the country’s labour market.

Bonds

· The yield on 10-year Treasuries dropped two basis points to 2.48 percent after increasing for a fifth day on Wednesday.

· Australian 10-year yields rose for a fifth straight session, adding one basis point to 2.80 percent.

Commodities

· Oil retreated less than 0.1 percent, trading near $53 a barrel after a government report showed U.S. crude inventories rose to the highest levels in weekly data going back to 1982.

· Gold was little changed at $1,234.18 an ounce.

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