(Corrects date of unemployment data in sixth paragraph.)
Emerging-market currencies in Asia fell with stocks outside Japan before the Federal Reserve reports on monetary policy and amid speculation U.S. interest-rate increases will be brought forward. Shares in Europe gained while zinc rose to the highest in 16 months as wheat and corn advanced.
Indonesia’s rupiah dropped 0.8 percent as at 8:32 a.m. in London, while Malaysia’s ringgit sank 0.3 percent and Thailand’s baht declined 0.1 percent. The Stoxx Europe 600 Index added 0.2 percent while Standard & Poor’s 500 Index futures were little changed. A gauge of Asian equities outside Japan lost 0.4 percent as South Korea’s Kospi index slipped 0.6 percent. Zinc advanced 0.7 percent, rising for a fourth day, and wheat and corn added at least 0.3 percent.
U.S. rates will be raised faster than investors expect, economists surveyed by Bloomberg June 12-16 predicted, with data yesterday showing inflation quickened in May by the most in more than a year. The Fed is expected to announce the fifth cut to stimulus at the end of its meeting today. In Asia, new home prices in China rose last month in 15 out of 70 cities versus 44 in April. Thailand is projected to keep its key rate unchanged.
“Last night’s U.S. consumer-price data has made people fear that the Fed will bring forward its forecast timing of the first rate hike,” Tim Condon, the Singapore-based head of Asian research at ING Groep NV said. “That would be negative for all risky assets.”
The Fed Open Market Committee, which started meeting in Washington yesterday, will reduce monthly asset purchases by another $10 billion to $35 billion, according to the median of 44 estimates compiled by Bloomberg, amid signs of ongoing improvement in the U.S. economy. Eurodollar futures, the world’s most actively traded short-term interest-rate contract, are underestimating the pace of U.S. tightening over the next two years, according to 55 percent of economists polled.
Consumer prices in the world’s largest economy rose 0.4 percent in May from April, when they gained 0.3 percent. The pace exceeded the 0.2 percent rate predicted by economists. Excluding volatile food and energy prices, the gain was the largest in almost three years. Another report in the U.S. showed housing starts fell a more-than-projected 6.5 percent in May from April. Weekly data on unemployment claims is due tomorrow.
BlackRock Inc. Chief Investment Strategist Russ Koesterich said yesterday in a Bloomberg Television interview there’s “a broader pricing power that’s starting to take hold in the economy and that’s indicative of stronger growth.” Inflation is “ticking a bit higher and that does suggest, among other things, the Fed may go a little bit earlier with the first rate hike than the market had expected,” he said.
The rupiah, Asia worst performing currency this quarter, dropped as much as 1.1 percent to a four-month low of 12,027 agasint the greenback and was last at 11,980. South Korea’s won fell for a fifth day, down 0.1 percent to 1,022.25 per dollar, the longest losing streak since January, while Malaysia’s ringgit sank to 3.2310, the most in two weeks.
Thailand’s baht decreased to 32.471 per dollar after earlier slipping as much as 0.2 percent to a one-week low. The Bank of Thailand will leave its benchmark interest rate unchanged at 2 percent today, the lowest level since 2010, according to 19 of 22 economists surveyed by Bloomberg.
“The better U.S. data is increasing the risk of higher U.S. rates and pushing up the dollar,” Son Eun Jeong, a Seoul-based strategist at Woori Futures Co. said.
Turkey’s lira rose 0.02 percent while the ruble stregthened 0.1 percent. Russia’s benchmark stock index, the Micex Index (INDEXCF), was up 0.05 percent following two days decline.
The MSCI Emerging Markets Index fell for a sixth day, down 0.3 percent in its longest losing streak since November.
China’s new-home prices rose in the fewest number of cities in two years in May as buyers remained reluctant to purchase in a slowing economy. Prices climbed in 15 of the 70 cities tracked by the government last month from April, according to a statement by the National Bureau of Statistics today, the fewest since May 2012.
A gauge of Chinese companies listed in Hong Kong fell 0.2 percent while the city’s Hang Seng Index was little changed. The Shanghai Composite Index (SHCOMP) decreased 0.5 percent, declining for a second day and on track for its lowest close in almost a week. Japan’s Topix index closed up 0.9 percent at a five-month high as the yen maintained yesterday’s 0.3 percent decline against the dollar.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, was little changed after jumping 0.3 percent yesterday, the most since June 2.
South Korea’s Kospi index fell to a six-month low, led by medical and precision machine makers and transportation equipment stocks, while in Sydney, the S&P/ASX 200 Index declined 0.3 percent.
The pound was little changed against the dollar before euro zone construction output data due later today. The Stoxx Europe 600 Index rose for a second day, on track for its highest close in a week.
Ten-year Treasury yields dipped 0.2 percent to 2.6496 percent after adding five basis points in New York. Rates gained as much as six basis points yesterday, the steepest increase since June 3. The extra yield the 10-year notes pay versus their German counterparts widened to 1.25 percentage points yesterday, the most since 1999, as the gap between price and policy trends in the two nations grows.
Yields on Australian bonds due in a decade climbed four basis points, or 0.04 percentage point, to 3.736 percent, rising for the first time in five days.
Taiwan’s 10-year bonds fell, pushing the yield up by the most since September. The yield on the 1.5 percent sovereign notes due March 2024 rose six basis points to 1.6499 percent, prices from GreTai Securities Market show.
West Texas Intermediate crude climbed 0.5 percent, rising for the first time in three days to $106.89 a barrel after retreating 0.5 percent last session. An industry report showed crude stockpiles in the U.S. shrank by 5.7 million barrels last week, according to a person familiar with the data from the American Petroleum Institute. Government data on U.S. supplies is also due today.
WTI prices rose 4.1 percent last week, the most since December, as escalating sectarian violence in Iraq fanned concern supplies from OPEC’s second-largest producer may be disrupted. The International Energy Agency said violence in Iraq hasn’t hurt crude output.
“Financial markets wouldn’t be resilient to an oil price spike,” ING’s Condon said. “But the absence of new bad news out of Iraq makes oil a background concern today, not the main driver of financial asset prices.”
Brent crude rose 0.3 percent to $113.81 a barrel, rising for a sixth day.
Zinc increased to $2,134.50 a metric ton, poised for its highest close since February last year as stockpiles monitored by the London Metal Exchange declined for a seventh straight day to the lowest since December 2010. Gold slipped 0.1 percent in the spot market to $1,269.58 an ounce after falling 0.5 percent over the past two days.
Wheat futures snapped a seven-day drop, rising 1.2 percent to $5.9775 a bushel, while corn rallied from the lowest level in more than four months as investors assessed development of the U.S. crop, forecast by the government to reach a record. Futures for December delivery rose as much as 0.3 percent to $4.41 a bushel on the Chicago Board of Trade and were last at $4.4075.
To contact the editors responsible for this story: Emma O’Brien at firstname.lastname@example.org Katrina Nicholas, John McCluskey