Asia: Stocks outside Tokyo slip amid US dollar's rally; crude jumps

[WELLINGTON] Stocks outside of Japan retreated in Asia as the US dollar cemented its ascendancy, with traders all but convinced the Federal Reserve will pull the trigger on a rate hike in December. Oil jumped.

Consumer and mining stocks drove declines from Australia to South Korea, while the yen's drop to an almost six-month low bolstered Japanese exporters, helping the Topix index to an eighth straight day of gains. Australia's currency extended its retreat with the Bloomberg US dollar Spot Index at its strongest point since January. US crude rose more than 0.9 per cent with Brent after Russian President Vladimir Putin expressed optimism over a deal to freeze output.

While the prospect of Donald Trump as US president unnerved markets in the lead up to the election, his vow to boost infrastructure spending has turbo-charged bets on a Fed hike, underpinning the US dollar's steepest two-week rally versus the yen since 1988.

Fed Chair Janet Yellen told lawmakers that the central bank is close to boosting borrowing costs, with speculation the president-elect will bolster fiscal stimulus already fueling bets on further policy tightening in 2017. In Europe, Angela Merkel said she'll run as German chancellor again, news that may calm markets after an exceptional few weeks.

"We have little doubt that the world is shifting into a new paradigm where politics and fiscal policy will gain far more prominence," Philip Borkin, a senior economist in Auckland at ANZ Bank New Zealand Ltd, said in an e-mail.

"Markets are indeed behaving that way already as the 'Trump trade' of higher yields and the US dollar remains the centrepiece of market moves." New Zealand issues data on credit-card spending Monday, and Thailand updates on third-quarter gross domestic product. Taiwan also reports on its current account.

The MSCI Asia Pacific excluding Japan Index fell 0.1 per cent as of 10am, declining for a second day as Australia's S&P/ASX 200 Index slipped 0.3 per cent. The Kospi index was down 0.4 per cent in Seoul, while New Zealand's S&P/NZX 50 Index dropped 0.2 per cent.

In Japan, the Topix climbed 0.7 per cent, on track for its longest run of gains since August last year as mining and insurance companies led the advance.

Futures Hong Kong's Hang Seng and Hang Seng China Enterprises gauges were down at least 0.3 per cent at the end of last week, as contracts on the FTSE China A50 Index retreated 0.3 per cent. S&P 500 Index futures were steady at 2,182.25.

The yen was little changed at 110.87 per US dollar following last week's 4 per cent slide, the worst since July.

"We have seen some monster moves over the past two weeks on Fed expectations,and I think that can't go on for much longer," Chris Weston, chief market strategist in Melbourne at IG Ltd said by phone. "I wouldn't be surprised to see a little bit of pause as investors take a break to catch their breath, and these Asian markets may take a little breather as well and see some consolidation, whether its been falling or rallying."

The South African rand led the retreat among major currencies, slipping at least 0.1 per cent with the Aussie. Emerging-market currencies in Asia largely maintained last week's losses.

The debt market took a breather, with 10-year Treasury yields little changed at 2.35 per cent following last week's 21 basis-point surge.

Yields on Australian bonds due in a decade were the biggest movers in Asia, falling three basis points, or 0.02 percentage point, to 2.69 per cent. Similar maturity Japanese notes yielded 0.03 per cent, down one basis point.

West Texas Intermediate crude rose for a second day, adding 0.9 per cent to US$46.11 a barrel after climbing 0.6 per cent on Friday. Brent gained 0.9 per cent to $47.30 per barrel.

There are no major obstacles left within the Organization of Petroleum Exporting Countries to reaching a deal on freezing output, Mr Putin told reporters Sunday in Lima. Iranian Oil Minister Bijan Namdar Zanganeh said its "highly probable" members will reach a consensus, according to comments published by the country's Shana news service.

While other precious metals advanced, gold held declines, trading little changed at US$1,208.38 an ounce following last week's 1.6 per cent decline.

BLOOMBERG