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Stocks Climb in Asia Yen Falls as Havens Retreat

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Stocks advanced in Asia following a record-breaking Wall Street session, while the yen declined as havens retreated amid optimism the U.S. favors a peaceful resolution to North Korea’s nuclear threats.

Futures on the S&P 500 Index rose with equities in Australia and Hong Kong, while South Korea’s Kospi index jumped the most since May. Japanese markets were closed for a holiday. European equity futures gained. The S&P 500 climbed above 2,500 for the first time on Friday and the Dow Jones Industrial Average chalked another record close as investors shrugged off the latest North Korean missile test. The dollar was steady after declining on Friday when U.S. retail sales raised concerns about the strength of the economy.

“With the latest missile test we really didn’t see much of a market footprint at all,” Todd Elmer, Singapore-based head of G-10 FX strategy for Asia ex-Japan at Citigroup Inc., told Bloomberg Television. “What that signals is that investors are not inclined to extrapolate that provocation into any major flareup in geopolitical tension.”

With weaker readings also on factory output and consumer confidence in August the focus now turns to the U.S. Federal Reserve meeting this week, where officials are expected to announce the start of the reduction of the central bank’s $4.5 trillion balance sheet, while keeping the benchmark rate unchanged. Investors will be tuning in to a fresh round of speeches by Fed Chair Janet Yellen and regional Fed presidents for clues on the central bank’s next moves as the outlook for the U.S. economy has been clouded by Hurricane Harvey. The Bank of Japan is also expected to stand pat when it meets to discuss its policy later in the week.

The U.S. seeks a peaceful resolution but is prepared to use military force if diplomatic efforts fail to end the nuclear standoff with North Korea, Secretary of State Rex Tillerson told CBS. The comments were made ahead of U.S. President Donald Trump’s first address before the United Nations on Tuesday as foreign leaders gather in New York to discuss how to deter North Korea from enhancing its nuclear capability.

Meanwhile, Japanese Prime Minister Shinzo Abe is weighing holding a snap general election as early as next month amid growing support for his handling of the North Korea crisis, according to public broadcaster NHK.

What to watch out for this week:

Home construction and sales of previously owned properties are the highlights of the week’s U.S. economic calendar.

Indonesia and the Philippines are among countries settling monetary policy.

The Reserve Bank of Australia releases minutes of its September board meeting on Tuesday.

The People’s Bank of China releases its net foreign exchange position data for August.

Japan trade and Malaysia CPI are also due.

Campaigning continues in Germany, days before the Sept. 24 election, as Chancellor Angela Merkel and challenger Martin Schulz both make their final pitches to voters. New Zealand also goes to the polls on Sept. 23.

Japan markets are shut for respect-for-the-aged day.

Here are the main moves in markets:

Stocks

Futures on the S&P 500 Index were up 0.3 percent as of 7:33 a.m. London time. The underlying measure rose 0.2 percent to 2,500.23 on Friday.

The Kospi index climbed 1.4 percent and Australia’s main gauge was up 0.5 percent at the close.

The Hang Seng Index in Hong Kong gained 1.1 percent. The Shanghai Composite Index was slightly higher.

Futures on the Euro Stoxx 50 increased 0.5 percent.

The MSCI Asia Pacific Index advanced 0.6 percent.

Currencies

The Japanese yen dipped 0.4 percent to 111.24 per dollar, extending Friday’s 0.5 percent drop.

The Bloomberg Dollar Spot Index was flat after falling 0.3 percent on Friday.

The euro was little changed at $1.1950.

The Australian dollar rose 0.3 percent to 80.22 U.S. cents while the New Zealand dollar added 0.2 percent to 73.12 U.S. cents.

Bonds

The yield on 10-year Treasuries was steady at 2.2 percent, a three-week high, in early London trading. There was no trading in Asia due to the Japan holiday.

Yields on Australian 10-year notes climbed almost six basis points to 2.80 percent.

German 10-year bund yields were little changed at 0.44 percent.

Commodities

Gold fell 0.3 percent to $1,316.29 an ounce, extending Friday’s 0.7 percent drop.

West Texas Intermediate crude rose 0.2 percent to $50 a barrel. Prices rose more than 5 percent last week, buoyed by higher demand forecasts.

Source: Bloomberg