Asia stocks face mixed start after US rebound

SYDNEY: Asian stocks were poised for a mixed end to a rough week following an afternoon rally in their US counterparts that erased most of the day’s losses.

Investors continue to mull the prospects for a pause in Federal Reserve tightening and the outlook for US-China trade talks.

Futures edged higher for equities in Japan and China, while Hong Kong contracts pointed to a lower start. Australian shares opened flat.

Futures on the S&P 500 Index were little changed after the US equity market recovered the bulk of the day’s declines on Thursday, though still ended lower.

Ten-year Treasury yields fell for a fifth consecutive session, though finished above their intraday lows.

The dollar was mixed overnight, rising against the Aussie and kiwi while dropping versus the yen and Swiss franc on haven demand.

Financial markets remained on tenterhooks amid worries that the trade truce between China and the US won’t last after the arrest of Huawei’s chief financial officer.

As traders start to doubt the Fed will raise rates in 2019, JPMorgan Chase & Co CEO Jamie Dimon said that while the focus has been on the Fed moving too quickly, there’s also a risk that the Fed does too little, too slowly.

Market-implied US rate expectations for next year edged below a quarter point last week, and have crumbled this week amid the slide in global equities and US-China trade tension.

Vanguard, in its annual forecast out Thursday in the US, said the central bank will stop hiking next summer.

“Up until recently there had been no real alternative to equities and today there’s a better option – cash.

“You’ve got the cost of capital across the spectrum starting to increase. That’s what we need to recalibrate our whole existential outlook to,” Savita Subramanian, head of US equity and quantitative research at Bank of America Merrill Lynch, told Bloomberg TV.

Elsewhere, oil continued to be a drag on financial markets, with West Texas Intermediate back below US$52 (RM216) a barrel as Opec ended talks without a deal on oil production cuts for the first time in nearly five years.

Energy producers in the S&P 500 sank and emerging-market equities plunged.