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Caution into Week End – Asia, Materials Down

Asian Markets Japan

Investors adopted a cautious tone at the end of a positive week for Asian stocks. Raw-materials shares slumped, while gold headed for a fourth weekly increase.

The dollar was mixed against major currencies after weakening Thursday on Treasury Secretary Steven Mnuchin’s statement that fiscal stimulus effects on the economy this year may be limited. Hong Kong stocks fell for a second day, while Tokyo shares dropped even as the yen retreated after a two-day gain. Commodity producers dragged equities lower after iron ore tumbled. Oil was poised for its best week of the year.

A fifth weekly gain for Asian shares that’s helped push the value of global equities above $70 trillion is losing momentum as money managers grapple with political uncertainty and the Federal Reserve’s schedule for lifting borrowing costs. Fed Bank of Dallas President Robert Kaplan urged his colleagues at the U.S. central bank to seize opportunities to raise interest rates, even as he said they should keep their options open ahead of next month’s policy meeting.

“There are those out there thinking, ‘Well, markets have had such a big runup, it’s time to take a bit of money off the table,”’ said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which managed about $120 billion as of December 2016. “It wouldn’t surprise me to see a bit of consolidation or correction, and maybe we’re starting to see signs of that.”

Markets from stocks to currencies have been subjected to intraday fluctuations this week as investors hang on each word from central bank officials and politicians. In addition to concerns about interest rates and Donald Trump’s economic policies, traders are also watching developments in French presidential elections and the U.K.’s Brexit plans.

“As the market waits for details on U.S. tax cuts, it’s more likely that officials’ comments affect the market,” said Kenji Ueno, portfolio manager at Sompo Japan Nipponkoa Asset Management. “U.S. fiscal policy is moving toward expansion, but the administration may be trying to cool off some of the expectation.”

(Source: Bloomberg)