Asia: Stocks mixed before Fed as yen strengthens

[SYDNEY] Asian stocks were mixed with Treasuries trading near the highest level this year as investors anticipated a near-certain rate hike from the Federal Reserve this week. Oil fell for a seventh day.

Japan's Topix index slipped for the first time in four days as the yen strengthened. Chinese equities traded in Hong Kong advanced as data showed China's economy started the year on a firm footing.

The yield on 10-year Treasuries remained at around 2.61 per cent. The pound held steady after the UK parliament paved the way for Prime Minister Theresa May to begin two years of talks with the European Union over Britain's exit. Oil headed for the longest losing streak in more than a year.

Global stocks are within a whisker of a record high as analysts ratchet up expectations for the Fed to raise interest rates at a faster pace than was expected at the start of this year. Data from China showed industrial production climbed 6.3 per cent in January and February combined, while retail sales advanced 9.5 per cent. A major winter storm is expected to hit the US East Coast early Tuesday.

"Markets fully expect a rate rise, so market reaction is likely to be muted unless the Fed disappoints which would lead to lower bond yields and a lower dollar, although that is not our expectation," Mike Bell, global market strategist at JPMorgan Asset Management, wrote in a note.

"All attention is likely to be focused on the press conference to see whether a more hawkish tone is struck, if so yields and the dollar could move higher still."

Traders view a quarter-point Fed hike this week as a virtual certainty after Friday's data, and will be watching the policy decision for signals on what will come next.

The Bank of Japan is set to keep its rates and yield-curve policy unchanged in its policy decision on Thursday. The Bank of England, Swiss National Bank and Bank Indonesia are also expected to stand pat with policy decisions. The Netherlands' election takes place March 15 amid a growing diplomatic spat with Turkey.

Earnings reports are due this week from firms including Oracle Corp, Tiffany & Co, and Prudential Plc.

G-20 finance ministers gather in Germany for a series of meetings. Opec will on Tuesday release its latest monthly report, which will offer an insight into the pace of production cuts. The IEA will release similar data on Wednesday.

Stocks

The MSCI Asia Pacific Index fell 0.1 per cent as of 11:33am in Tokyo. The Topix index fell 0.2 per cent after closing Monday at the highest since December 2015.

Australia's S&P/ASX 200 Index was little changed and South Korea's Kospi rose 0.5 per cent after jumping one per cent in the previous session.

Chinese shares traded in Hong Kong climbed 0.3 per cent after surging 1.9 per cent on Monday for the biggest gain since November.

Futures on the S&P 500 Index were down 0.1 per cent after the benchmark gauge ended Monday virtually unchanged. The Stoxx Europe 600 Index rose 0.4 per cent, for a fourth straight gain.

Currencies

The yen rose less than 0.1 per cent to 114.80 per US dollar, after swinging between gains and losses 0.1 per cent. The Bloomberg Dollar Spot Index rose less than 0.1 per cent.

The euro was little changed at US$1.0655, while the pound slipped less than 0.1 per cent. The UK currency rose 0.4 per cent on Monday as parliament gave Prime Minister Theresa May permission to trigger Brexit. Meanwhile, Scottish First Minister Nicola Sturgeon said she'll start the legal process of preparing for a second independence referendum.

Bonds

The yield on 10-year US government bonds slid one basis point to 2.61 per cent. That leaves it above the 2.60 per cent level that Bill Gross says would herald the start of a bond bear market if it holds for a week.

The yield on 10-year Australian government bonds fell one basis points to 2.93 per cent.

Commodities

Copper futures held gains after adding 1.2 per cent the previous session.

BLOOMBERG