Asia Stocks Mixed; U.S. Futures Dip; Dollar Down: Markets Wrap

Asian stocks saw a mixed open Wednesday as investors weighed a report that the Trump administration is considering sanctions on Chinese officials, another sign of deteriorating Sino-American relations. The dollar and Treasuries held overnight losses.

Shares in Seoul and Sydney dropped, while those in Tokyo saw smaller losses. S&P 500 futures dipped after the gauge closed at an 11-week high. The index gave up almost half its gains in the final half hour of trading with chipmakers exposed to China tumbling. The report suggested that the Treasury Department could impose controls on transactions and freeze assets of Chinese officials and businesses for implementing a new national security law that would curtail the rights and freedoms of Hong Kong citizens. The yen fluctuated.

The recent strength in equity markets “is an indication that investors are getting optimistic about the reopening of the economy and the drug treatment development,” Katerina Simonetti, senior portfolio manager at UBS Private Wealth, said on Bloomberg TV. “We hope that it will eventually lead to a normalization in the market but we have to keep an eye on the re-emergence of virus cases.”

The latest economic data had showed that the easing of lockdown restrictions is boosting economic activity in the U.S. Investors are now contending with an increase in hostilities between the world’s two largest economies that could threaten global trade at a delicate time for a world recovering from the coronavirus pandemic.

“The narrative for markets is shifting somewhat, with hopes associated with the easing of lockdown measures in many countries and still very exaggerated hopes of a vaccine being found short-term, needing to be balanced against escalating U.S./China tensions,” said Marc Ostwald, chief economist and global strategist at ADM Investor Services.

Elsewhere, crude oil retreated and gold was steady.

Here are some key events coming up:

  • Thursday brings the U.S. jobless claims reading for the week ended May 23.
  • Federal Reserve Chairman Jerome Powell participates in a virtual discussion on Friday.

These are the main moves in markets:

Stocks

  • Futures on the S&P 500 Index dipped 0.1% as of 9:05 a.m. in Tokyo. The gauge added 1.2% on Tuesday.
  • Japan’s Topix index added 0.2%.
  • South Korea’s Kospi index slid 0.1%.
  • Australia’s S&P/ASX 200 Index fell 0.5%.

Currencies

  • The Bloomberg Dollar Spot Index was steady after sinking 0.9%.
  • The yen was at 107.51 per dollar.
  • The offshore yuan held at 7.1465 per dollar.
  • The euro bought $1.0977.

Bonds

  • The yield on 10-year Treasuries dipped to 0.69%.

Commodities

  • West Texas Intermediate crude slid 1% to $34.02 a barrel.
  • Gold was at $1,712.15 an ounce.

— With assistance by Sophie Caronello, Jeremy Herron, Claire Ballentine, and Vildana Hajric

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