Yen Weakens, Stocks Climb on U.S. Congress Deal: Markets Wrap

Tokyo (May 1)  The yen weakened with bonds, while stocks and U.S. futures climbed, as a tentative deal by the U.S. Congress to avert a government shutdown offset weaker economic data from China and America.

The Japanese currency slipped for the fifth day in six, while Treasuries retreated with gold. The MSCI All Country World Index edged higher, after capping a sixth straight month of gains on Friday. Japan’s Topix rose to the highest level since March after its best week of the year. Trading volumes were lower than average due to holidays in most of Europe, China, India and Mexico, and a forthcoming three-day break in Japan.

U.S. House and Senate negotiators reached a tentative bipartisan agreement Sunday night on a $1.1 trillion bill to keep the government open through the end of September, according to Republican and Democratic aides. The news triggered a swing in markets in Asia after equities and currencies’ traders had been loath to take additional risk ahead of a busy week for macro-economic events and data.

“It’s a good thing a tentative deal was reached without too much trouble,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. in Tokyo. “It seems that we’re able to put behind some of the things that the market’s recently been worried about. But U.S. economic data on jobs and the GDP is reason for caution.”

China data from the weekend showed a decline in manufacturing and services gauges. That followed weaker-than-expected U.S. growth in the first quarter, casting doubts on the strength of the global expansion after optimism on the economy and earnings pushed stocks to records last month.

Investors will be watching comments from a policy meeting of the Federal Open Market Committee this week and the monthly U.S. employment report on Friday, as well as corporate earnings from global heavyweights. The second round of the French presidential election takes place May 7; Marine Le Pen said Monday she would begin negotiations on a euro exit immediately if elected. Traders are also weighing the possibility of escalating tension between the U.S. and North Korea.

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Here are the main events and data releases coming up this week:

•Personal spending data as well as a read on ISM manufacturing for April is due from the U.S. Monday.

•Australia will deliver a monetary policy decision Tuesday. The benchmark interest rate will remain unchanged at 1.5 percent for a ninth month, traders and economists predict, after data last week showed quickening inflation.

•Apple Inc., BP Plc, BNP Paribas SA, Facebook Inc., HSBC Holdings Plc, Time Warner Inc., Pfizer Inc., Merck & Co., BMW AG, Royal Dutch Shell Plc and Volkswagen AG are among companies releasing earnings.

Here are the main moves in markets:

Currencies

•The yen touched 111.92 per dollar, the weakest level since the end of March, and traded down 0.2 percent at 111.73 per dollar as of 7:22 a.m. in New York. The currency last week had the biggest slide since the Fed raised U.S. rates in December.

•The Bloomberg Dollar Spot Index was little changed. The U.S. currency gained 0.3 percent against the British pound and was little changed versus the euro.

Stocks

•The MSCI index was up less than 0.1 percent after rising 1.4 percent in April.

•Japan’s Topix index advanced 0.5 percent to the highest close since March 29.

•Futures on the S&P 500 Index increased 0.2 percent. The benchmark gauge posted a 1.5 percent gain last week, the most since the five days through Feb. 17.

Commodities

•Gold dropped 0.4 percent to $1,262.92 an ounce. The metal declined 1.3 percent last week, paring a yearly advance to 10 percent.

•West Texas Intermediate crude fell 0.5 percent to $49.07 a barrel. Oil lost 2.5 percent in April, and is down almost 9 percent this year.

Bonds

•The yield on 10-year Treasuries rose two basis points to 2.30 percent, after dropping for three straight sessions.

Source: Bloomberg