Global Stocks Struggle as Dollar Pulls Back -- Update

By Kenan Machado Features Dow Jones Newswires

Many Asian stock markets struggled to remain in positive territory Thursday following strong gains the day before, while the U.S. dollar came under some pressure.

Continue Reading Below

The currency's weakness followed the Federal Reserve's latest policy statement--which indicated it remains on course to raise rates once more this year--and amid reports Fed governor Jerome Powell is President Donald Trump's choice to be the central bank's next chairman.

Meanwhile, the Bank of England later Thursday is widely expected to lift its main interest rate for the first time in more than a decade.

The Wall Street Journal Dollar Index was recently down 0.2%, reversing the gains seen in the previous two days. Chatter that proposed tax cuts also set to be unveiled Thursday wouldn't be as extensive as expected weighed on the dollar, said Sean Callow, a forex strategist at Westpac.

With Mr. Powell reported to be Mr. Trump's choice, dollar bulls seem to be using the moment as a good excuse to adjust long-dollar positions, said Masashi Murata, currency strategist at Brown Brothers Harriman.

Meanwhile, Chinese stocks were weighed by concerns about a global move toward ending easy money. A Beijing-led crackdown on leverage has also been under way this year. Chinese stock benchmarks were recently down about 0.7%.

Continue Reading Below

Chinese policy makers want to direct credit toward infrastructure, innovation and job creation, said Wendy Liu, head of research for greater China at Nomura. "Continued efforts toward squeezing extra froth out of interbank flipping of financial products is akin to taking away the easy money and getting people to do real work," she added.

Helping trigger broader softness in Asian stocks were reports that Republicans are set to face challenges with their coming tax-reform proposal, said Vasu Menon, a senior investment strategist at OCBC Bank. "To some extent there is profit-taking as the initial euphoria is waning."

The prospect of legislation progressing helped fuel October's global stock rally. S&P 500 futures were recently down 0.2%.

Soon after the start of trading, South Korea's Kospi, Japan's Nikkei and Australia's S&P/ ASX 200 hit fresh 2017 highs. But the Kospi weakened through Thursday trading, and was recently off 0.4% ahead of the close. While the ASX 200 finished down 0.1% amid a 2.8% drop by National Australia Bank following its fiscal-year report, Japanese stocks rallied in the last hour of trading. That saw the Nikkei end up 0.5%--setting another 21-year high.

Singapore's benchmark, which has been setting two-year highs of late, was Thursday's weakest performer, dropping 0.7%. There, investors appeared to be using the past day's steady oil prices as an opportunity to book profits in shares of banks and rig builders.

Asian stocks "have run hard in the past few days, and investors seem to question whether further gains are justified," said Michael McCarthy, chief market strategist at CMC Markets.

But New Zealand's NZX 50 Index rebounded 0.4% after logging its biggest drop Wednesday in eight months, despite the broad regional gains posted then.

Suryatapa Bhattacharya contributed to this article.

Write to Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

November 02, 2017 02:32 ET (06:32 GMT)