Asian Stocks Wary, Dollar Slips Before Fed Chair Yellen’s Speech

SINGAPORE/TOKYO (Reuters) -
People walk by an electronic stock board of a securities firm in Tokyo. (AP Photo/Koji Sasahara)
People walk by an electronic stock board of a securities firm in Tokyo. (AP Photo/Koji Sasahara)

Asian stocks were largely steady on Friday, with modest losses in some markets and gains in others reflecting nervousness before a keenly anticipated speech by U.S. Federal Reserve Chair Janet Yellen.

European markets are also heading for a flat start, with financial spreadbetter CMC Markets expecting Britain’s FTSE 100 and Germany’s DAX to open little changed, and France’s CAC 40 to begin the day down 0.1 percent.

“The expectation surrounding [Yellen’s speech] has been out of all proportion to the likely outcome, which in all probability is likely to be fairly benign,” Michael Hewson, chief market analyst at CMC Markets in London.

“Some in the markets are slowly coming to the realization that central bankers the world over are fumbling around in the dark as they try to reinvigorate their economies,” he added.

MSCI’s broadest index of Asia Pacific shares outside Japan was little changed as investors awaited some direction from Yellen on whether the Fed might raise interest rates this year. Yellen will speak at 1400 GMT at the annual gathering of global central bankers in Jackson Hole, Wyoming.

The Asia-Pacific benchmark is on track for a 0.3 percent loss for the week, but is up nearly 9 percent so far this year.

Japan’s Nikkei extended losses to close down 1.2 percent, bringing declines for the week to 1.1 percent. South Korea’s Kospi dropped 0.2 percent, on track for a 0.9 percent slide for the week.

Chinese shares, however, recouped the previous session’s losses, with some traders attributing the gains to regulators’ denial that insurance money is exiting the market.

The CSI 300 and Shanghai Composite indices each rose 0.2 percent. They’re on track for declines of 1.5 percent and 1.1 percent, respectively.

U.S. stocks were modestly lower on Thursday, weighed down by a drop in healthcare and consumer companies.

Investors in riskier assets are wary of Yellen hinting at a near-term interest rate hike, which could divert some of the massive liquidity that has underpinned global markets.

“After a week where most markets have barely moved from where they started, there are likely a number of traders who would relish a bit of volatility this evening,” Angus Nicholson, market analyst at IG in Melbourne, wrote in a note.  “There certainly is a fear evident in markets that Janet Yellen is going to be surprisingly hawkish and talk up a September hike.”

Hawkish comments from a slew of other Fed officials have already raised markets’ expectations of a rate hike this year, though markets are not fully pricing one in until 2017.

On Thursday, several policymakers, including San Francisco Fed President John Williams and Kansas City Fed President Esther George, defended the need to raise interest rates, albeit gradually, to keep the U.S. economy from overheating.

Those comments were roughly in line with the views expressed by Fed policymakers including Vice Chair Stanley Fischer earlier in the week, adding to expectations that Yellen’s comments would be in a similar vein.

But uncertainty pulled the U.S. currency lower, with the dollar index, which tracks the greenback against six major peers, slipping 0.14 percent to 94.634. That shrunk gains for the week to 0.1 percent.

The dollar was also 0.1 percent weaker versus the yen at 100.48 yen, having risen a modest 0.3 percent so far this week.

The euro was treading water at $1.12920, on track to dip about 0.2 percent on the week.

The Australian dollar nudged up 0.25 percent to $0.7637.

Oil prices pulled back from overnight gains, after Saudi Arabia’s energy minister tempered expectations of strong market intervention by producers during talks next month, saying the market is already moving in the right direction.

Global benchmark Brent crude lost 0.4 percent to $49.49 a barrel, eroding some of the 1.3 percent gains posted overnight and poised for a loss of 2.75 percent for the week.

U.S. crude oil slipped 0.2 percent to $47.22 a barrel after rising 56 cents, or 1 percent, on Thursday. It’s set to end the week 2.7 percent lower.

Wariness ahead of Yellen’s speech gave gold a leg up. Spot gold inched up 0.2 percent to $1,323.67 an ounce, narrowing this week’s losses to 1.3 percent.