Asia Stocks Decline; Euro Slips After Italian Vote

Asian equities declined on continued investor concern about the impact of American tariffs on the global economy. The euro slid and Italian bond futures fell after initial results from the country’s election suggested a hung parliament.

Stocks fell from Tokyo to Sydney, with the steepest drop seen in Hong Kong. Materials, industrial and energy shares underperformed. U.S. equity futures retreated, muting the impact of the S&P 500 Index’s late rally Friday. Shares in Shanghai outperformed, as China kept its 2018 growth target of around 6.5 percent. The dollar strengthened and Treasury yields declined.

The euro weakened against the greenback as Italy’s anti-establishment groups surged in Sunday’s election. Before the close of polling stations, it had risen on news from Germany that the Social Democrats backed a government coalition with Angela Merkel’s Christian Democrat-led bloc.

A combination of a more hawkish tone from the Federal Reserve and Trump’s proposed tariffs riled markets last week. As the initial panic over Trump’s trade talk eased, China said it will host U.S. officials for a new round of dialogue on trade issues. Attention now turns to developments in politics in Europe and to jobs data due in the U.S. at the end of the week.

There is a "lot of politics this week with Italy elections and NPC in China, also trade measures,” Frank Benzimra, head of Asia equity strategy at Societe Generale SA in Hong Kong, said. “The return of volatility we have seen since the end of January will probably remain."

Lowy Institute Senior Fellow Richard McGregor weighs in on President Trump’s steel and aluminum tariffs.

Elsewhere, oil climbed as geopolitical risk resurfaced, with a halt at Libya’s biggest crude field sparking speculation that supply will tighten and help reduce a global glut.

Here are some key events coming up this week:

The Chinese People’s Political Consultative Conference runs through March 15 and overlaps with the National People’s Congress meetings in Beijing, through March 20.

The Bank of Japan deputy governors’ confirmation hearings will be held Monday.

Reserve Bank of Australia monetary policy decision on Tuesday, with GDP data due Wednesday.

The European Central Bank isn’t expected to change policy on Thursday, but the Governing Council may discuss a change to pave the way for the end of quantitative easing.

Bank of Japan monetary policy decision and briefing on Friday.

U.S. monthly payrolls data.

These are the main moves in markets:

Stocks

The MSCI Asia Pacific Index fell 0.9 percent as of 4:09 p.m. Tokyo time.

Topix index decreased 0.8 percent.

Hong Kong’s Hang Seng Index declined 1.6 percent.

Kospi index dropped 1.1 percent.

Australia’s S&P/ASX 200 Index retreated 0.6 percent.

Futures on the S&P 500 Index fell 0.7 percent.

Currencies

The Bloomberg Dollar Spot Index rose 0.1 percent.

The Japanese yen rose 0.3 percent to 105.46 per dollar.

The euro fell 0.2 percent to $1.2293.

Bonds

The yield on 10-year Treasuries fell four basis points to 2.82 percent.

Japan’s 10-year yield dipped two basis points to 0.044 percent.

Australia’s 10-year yield rose one basis point to 2.747 percent.

Commodities

West Texas Intermediate crude rose 0.3 percent to $61.46 a barrel.

Gold rose 0.3 percent to $1,326.26 an ounce.

LME copper was little changed at $6,900.50 per metric ton.

Source: Bloomberg