Asian equity investors stepped back from Thursday’s gains, following U.S. shares lower as Janet Yellen prepares to weigh in on the path for interest rates. The dollar weakened after its longest winning streak since May.
Equities in Japan declined after three days of gains, even as a gauge of consumer prices rose for the first time since December 2015. South Korean stocks tumbled with the won on reports that China will curb tourism to the country. The yen strengthened, after four days of losses amid increasing confidence that the Federal Reserve will raise rates this month. The 10-year Treasury yield was flat after climbing for the past four days and gold edged lower.
The dollar’s recent advance and declines in gold and Treasuries lined up with increasing odds for tighter monetary policy, which got a boost as Lael Brainard became the latest Fed official to support the case for tightening “soon.” Rallies in equities and commodities predicated on stronger economic growth failed to keep pace even as reports showed a pickup in European inflation and a tighter U.S. jobs market. The rise in the Bank of Japan’s preferred measure of consumer prices offered some hope that inflation will begin inching toward Governor Haruhiko Kuroda’s 2 percent target this year.
“The markets are in the short-term overextended,” said Mark Matthews, Singapore-based head of Asia research at Bank of Julius Baer. “Longer term, the reason why rates are going up is because the economy is getting better, and that’s good for stocks.”
Upcoming events that traders are looking out for:
Yellen gives an address on the economic outlook on Friday in Chicago after her deputy Stanley Fischer speaks in New York.
The Chinese People’s Political Consultative Conference, an advisory body of more than 2,000 political elites, business executives and others, opens its annual session in Beijing on March 3.
Here are the main moves in markets:
The yen rose 0.2 percent to 114.14 per dollar as of 4:34 p.m. in Tokyo. The currency is still down 1.8 percent this week, its biggest decline this year. The Bloomberg Dollar Spot Index fell 0.1 percent, after a five-day rally.
The Korean won dropped 1.3 percent, to the lowest since Feb. 1.
The kiwi and the Canadian dollar each lost at least 2 percent this week.
The Topix lost 0.4 percent, after closing at the highest level since December 2015 on Thursday. Australia’s S&P/ASX 200 Index slid 0.8 percent, after the biggest surge since November in the previous session.
The Kospi was down 1.1 percent, the most since November, as Korean newspapers reported that China ordered travel agencies to stop selling travel packages into the country. The Hang Seng Index slid 0.7 percent and a measure of China shares in Hong Kong dropped 1.2 percent.
Futures on the S&P 500 Index fell 0.3 percent. The benchmark gauge lost 0.6 percent on Thursday, after briefly climbing above 2,400 for the first time during the previous session. The Stoxx Europe 600 Index closed little changed.
Yields on 10-year Treasuries were little changed at 2.47 percent. The two-year yield, the coupon most sensitive to Fed actions, touched 1.336 percent on Thursday, the highest since 2009.
Gold slipped 0.3 percent to $1,230.08 an ounce. It’s down 2.2 percent for the week, after four straight weeks of advances.
Oil rose 0.3 percent to $52.78 a barrel, halting a three-day slide.
Copper was little changed, after Thursday’s 1.4 percent drop. Iron ore fell 2.9 percent.