Pound Slips, Asia Stocks Drop as Losses in Chinese Equities Deepen

Asian stocks fell in the wake of weakness in the U.S. amid worse-than-expected corporate earnings and data. The pound edged lower after rallying Tuesday on news of a U.K. election.

Equity markets in China were hardest hit, with the benchmark index in Shanghai tumbling for a fourth day. Shares from Sydney to Seoul also fell, but Japan bounced back from earlier losses as the yen weakened. The pound remained near its strongest level this year ahead of a parliamentary vote for an election on June 8. The yield on Japan’s benchmark 10-year government note touched zero, while the Australian 10-year yield fell to its lowest since November. The Australian dollar was the weakest major currency. Zinc, aluminum and iron ore rose after sharp drops earlier in the week.

The odds of the Federal Reserve raising interest rates in June have fallen to about 43 percent from more than 60 percent earlier in April as investors question the strength of the U.S. economy. They are also waiting for President Donald Trump’s proposed tax cuts and infrastructure plans to materialize.

Uncertainty coupled with weaker-than-expected results from heavyweights IBM and Goldman Sachs Group Inc. has pushed some investors away from riskier assets like stocks and into havens including Treasuries and the yen. A vote in Britain will be preceded by the French presidential election, while a standoff over North Korea’s nuclear weapons program drags on.

Here are the main moves in markets:

Stocks

· The Shanghai Composite Index fell 1.3 percent, taking its four-day loss to 3.7 percent as of 1.35 p.m. local time. It is at its lowest since Feb. 8. The main Shenzhen market was also down a fourth day.

· The Hang Seng Index slid 0.6 percent and the Hang Seng China Enterprises Index dropped below the 10,000 level for the first time in two months. The MSCI Asia Pacific Index retreated 0.3 percent.

· Japan’s Topix index gained 0.2 percent, rising for a third day.

· Australia’s S&P/ASX 200 Index lost 0.5 percent and South Korea’s Kospi index fell 0.4 percent.

· Futures on the S&P 500 rose 0.1 percent after the underlying gauge slipped 0.3 percent Tuesday. IBM slumped in after its 20th consecutive quarterly sales decline.

Currencies

· The yen slipped 0.2 percent to 108.66 per dollar after gaining 0.5 percent Tuesday. The Bloomberg Dollar Spot Index rose 0.1 percent following a two-day decline.

· The pound was down 0.1 percent at $1.2830 after its 2.2 percent surge Tuesday. The euro was also down 0.1 percent.

· The Australian dollar slid 0.5 percent following its 0.4 percent drop the previous day.

Bonds

· The yield on 10-year Treasuries rose one basis point to 2.18 percent after an eight-basis-point plunge Tuesday.

· The yield on similar-dated Japanese bonds briefly fell to zero for the first time since November before rising back to 0.005 percent. The yield on Australian notes due in a decade slid three basis points to 2.46 percent.

Commodities

· Iron ore put the brakes on its decline, rising 1.3 percent after losing 8 percent in the first two days of the week.

· London Metal Exchange zinc for delivery in three months rebounded, advancing 0.5 percent to $2,535 per metric ton. Aluminum, copper, lead and nickel all rose.

· Gold declined 0.3 percent to $1,285.50 an ounce.

· West Texas Intermediate crude oil dropped 0.2 percent to $52.30 a barrel, falling for a third day.


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