Stock Markets Diverge as Investors Focus on the Dollar

Asian equity markets lacked direction early Tuesday, with New Zealand's benchmark rebounding after four straight days of declines even as equities in neighboring Australia sagged.

The NZX 50 was recently up 0.8%, led by export-reliant names as the U.S. dollar steadied. A2 Milk rose 4% and Auckland International Airport rebounded 2.5%. Concerns about a weakening U.S. dollar had been pressuring New Zealand stocks, which posted monthly gains in 2017.

But Australia's S&P/ASX 200 shed 0.5% as the country's large miners cooled and the utilities sector extended declines, falling more than 1% to its lowest level since October.

Rio Tinto, which had surged 19% in five weeks, fell 0.9% after hitting a fresh 6 1/2-year high in early trading on record production figures for 2017. BHP Billiton, which had risen on stronger commodities prices partly driven by the U.S. dollar's weakness, fell 0.8%.

The dollar steadied in Asian trading after hitting a fresh three-year low on Monday, helping Japan's Nikkei offset initial softness. The benchmark index rose 0.3% and the greenback hit session highs of Yen110.90 after trading around Yen110.50 in early trade.

Indexes elsewhere in the region were little changed in early trading after U.S. markets were closed Monday for a holiday.

Despite selling stopping for now in the dollar, it "can't find a friend at the moment in the market," said Chris Weston, chief market strategist at IG Markets.

"There's a wave of capital moving out of the U.S." amid factors including the market pricing in a more-aggressive pace of interest-rate increases in Europe than the U.S.

Michael J. Howell, managing director at CrossBorder Capital, said "money that rushed into the U.S. mid-decade is set to get pulled out, potentially sending the ICE dollar index down another 5% to 10% this year." The dollar was helped by "whopping flows of 'flight' capital" from 2014 to 2016, he added, "largely from China, emerging markets and the eurozone."

On Monday, the euro hit its strongest level versus the dollar since December 2014 while the British pound reached its highest levels since June 2016's vote to leave the European Union.

The euro and pound were flat against the dollar ahead of inflation data from Germany and the United Kingdom due later Tuesday.

Oil prices pulled back in Asia. The global Brent benchmark was recently down 0.3% at $70.03 a barrel after hitting a fresh three-year settlement high Monday.

(END) Dow Jones Newswires

January 15, 2018 22:09 ET (03:09 GMT)