Asian Futures Pace U.S. Lower as Kiwi Drops After RatesStephen Kirkland and Lu Wang
Asian equity futures followed U.S. stocks lower as Treasury yields rose and investors weighed the outlook for global stimulus and economic growth. Crude dropped and the yen strengthened versus the dollar, while New Zealand’s currency fell after the central bank said it was overvalued.
Nikkei 225 Stock Average futures slid 1.8 percent and Hang Seng Index contracts fell 0.6 percent after a holiday in Hong Kong yesterday. Standard & Poor’s 500 Index futures rose less than 0.1 percent after the gauge retreated a third day in New York. Ten-year Treasury yields approached a 14-month high as the U.S. sold notes at the highest yield since 2011. The so-called kiwi lost 0.5 percent after Reserve Bank of New Zealand Governor Graeme Wheeler said the currency is too strong and left benchmark interest rates at a record low.
More than $2.5 trillion has been erased from the value of global equities since Federal Reserve Chairman Ben S. Bernanke said May 22 that the Fed could scale back stimulus efforts should employment show “sustainable improvement.” U.S. jobless claims held at 346,000 in the week to June 8, according to the median of 51 estimates compiled by Bloomberg before a report tomorrow. Bolstering prospects for the euro region, data yesterday showed industrial output unexpectedly rose in April.
“You have this tug-of-war in the valuation of securities,” Rex Macey, who helps oversee $20 billion as chief investment officer at Wilmington Trust Investment Advisors in Atlanta, said in a phone interview. “You’re getting this attention between what I’d call optimism about higher growth rates, which leads the market higher and creates higher valuations, and higher interest rates, which pulls valuations down.”
Futures on Australia’s SPI 200 Index also dropped, losing 0.8 percent. The Dow Jones Industrial Average retreated 0.8 percent to complete its first three-day losing streak this year, while the S&P 500 slipped 0.8 percent in U.S. trading.
JPMorgan Chase & Co.’s Global FX Volatility Index was up 1.2 percent at 10.68 percent, the highest level in almost a year. The Chicago Board Options Exchange Volatility Index, known as the VIX, rose 8.9 percent to 18.59, the highest since February.
Widening swings in U.S. shares have prompted options traders to make unprecedented bets on equity volatility, pushing bullish and bearish contracts to records amid concern the Federal Reserve will curtail stimulus. Options outstanding on the iPath S&P 500 VIX Short-Term Futures ETN, tracking a gauge of VIX futures, climbed to an all-time high of 3.46 million June 6, based on data compiled by Bloomberg.
The kiwi weakened to 79.49 U.S. cents, posting the steepest decline among 16 major currencies tracked by Bloomberg, as Governor Wheeler said policy makers expect to keep the Official Cash Rate unchanged at 2.5 percent through the end of 2013. New Zealand’s currency is down 4.1 percent versus the greenback this year after Wheeler said last month the central bank is prepared to step up intervention to weaker the kiwi.
Australia’s dollar fell 0.2 percent to 94.66 U.S. cents, while the yen gained 0.2 percent to 95.79, the strongest level on a closing basis since April 3. The Dollar Index lost 0.2 percent yesterday to 80.97, the lowest level since February.
Crude oil dropped 0.2 percent to $95.73 a barrel, after rising to $95.88 in New York amid concern Middle Eastern tensions are intensifying and as the dollar weakened.
The ASE Index sank 3.2 percent in Athens as Greece became the first developed nation cut to emerging-market status by MSCI Inc. The drop took the measure to its lowest level in two months. MSCI, which runs equity gauges tracked by investors with about $7 trillion in assets, downgraded Greece to an emerging market after the ASE’s 83 percent plunge since 2007.
The Stoxx Europe 600 Index fell 0.4 percent yesterday, reversing an earlier advance of as much as 0.7 percent and sliding to the lowest level since April 22 as auto and construction companies led losses. The VStoxx Index, the VIX’s European counterpart that tracks the cost the Euro Stoxx 50 Index options, advanced 3.5 percent to 21.74 and is up 11 percent in two days.
Yields on 10-year U.S. Treasuries added four basis points to 2.23 percent, while 30-year rates jumped seven basis points to 3.38 percent, a two-month high on a closing basis.
Treasuries remained lower after the U.S. sold $21 billion of 10-year securities, the second of three note and bond auctions this week totaling $66 billion. The notes yielded 2.209 percent at the sale, the most since October 2011, versus a forecast of 2.195 percent in a Bloomberg News survey of eight of the Fed’s 21 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of debt offered, was 2.53, the least in 10 months.
The MSCI Emerging Markets Index was little changed at 954.38 after a five-day decline. Brazil’s Ibovespa lost 1.2 percent, falling to the lowest level since August 2011.