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Global Stock Markets Fade as Wild Month Ends

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02/27/2018 | 02:17am EST

By Gregor Stuart Hunter

Asia-Pacific equities faded, led by Chinese big caps, during afternoon action as buying appetite for global stocks looks to be waning at the end of a roller-coaster month.

February saw a big early slide--pushing some markets into correction territory for the first time in two years--which was followed by steady gains that have since erased much of the decline.

Take the Shanghai Composite, home to large China firms--many of which are state controlled. So far this month, the weekly moves have been at least 2%, after having just one such weekly change all of last year.

The index was recently down 1.1%, as it's set to end a six-day winning streak.

The weakness also weighed on indexes in Taiwan and Hong Kong, where the benchmark Hang Seng fell 0.5% on declines in banks and materials producers. The tech-heavy Taiex ended down 0.2% after earlier rising as much as 0.9%.

But Chinese small-cap stocks extended Monday's outperformance. The ChiNext Price Index rose an additional 1% after jumping 3.6% a day earlier, its biggest gain in seven months. Even so, early gains Tuesday tapered off as the day progressed.

The stock moves in China come as mainland investors are still digesting news that the Communist Party plans to remove term limits on the country's presidency, potentially allowing Xi Jinping to remain in power indefinitely.

While that is "potentially damaging to the long-term prospects for establishment of the rule of law," said Andy Rothman, investment strategist at Matthews Asia, it is "unlikely to have a significant impact on near-term economic prospects or the investment environment."

Elsewhere, early stock gains turned into declines in India and Singapore on Tuesday while Australia and New Zealand saw their advances shrivel by the close of trading there.

Japan, though, held up as the Nikkei finished with a 1.1% gain. Helping that market was the yen reversing some of early Monday's gains overnight. It has risen for seven of the past nine sessions, cutting its February drop to 3.1%.

S&P 500 futures were recently down 0.2%.

More broadly, investor sentiment continued to improve ahead of the first public appearance, due to start later Tuesday, of Jerome Powell on Capitol Hill as head of the Federal Reserve.

For the dollar to continue rebounding, "Powell needs to set the stage for the Fed to upgrade its economic outlook" at next month's policy meeting, "affirm the stance for U.S. inflation to rise towards its 2% target this year and open the door for the Fed to consider a gradual path of one hike per quarter," said DBS.

Markets have been benefiting from falling global bond yields.

Ten-year U.S. Treasury yields haven't been able to reach the psychologically important 3% level. They fell for three straight sessions through Monday and in five of the past seven, easing back to 2.86%. The benchmark yield on 10-year Treasurys started the year at 2.41%. Meanwhile, Japan's 10-year yield matched a 2018 low of 0.044% on Tuesday.

"U.S. bond markets appear to have arrived at a point where evidence of improved wage growth and inflation will be required to push yields significantly higher," said Ric Spooner, chief market analyst at CMC Markets. "This has given license to investors to push stock indexes higher in response to good" earnings seasons.

Write to Gregor Stuart Hunter at gregor.hunter@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
CHINA-SHANGHAI COMP -0.34% 2751.8 End-of-day quote.10.17%
DJ INDUSTRIAL -0.40% 25850.63 Delayed Quote.10.96%
HANG SENG 0.65% 28786.27 Real-time Quote.10.16%
NASDAQ 100 -0.38% 7035.164 Delayed Quote.11.57%
NASDAQ COMP. -0.39% 7459.7078 Delayed Quote.12.87%
NIKKEI 225 -0.18% 21425.51 Real-time Quote.7.08%
S&P 500 -0.35% 2774.88 Delayed Quote.11.08%
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