Asian markets mixed after US gains, Brazil stocks plunge on political crisis

The electronic board displaying stock activity at the Brasil Bolsa Bacao (B3) stock exchange in Sao Paulo, Brazil, on Thursday, May 18.
The electronic board displaying stock activity at the Brasil Bolsa Bacao (B3) stock exchange in Sao Paulo, Brazil, on Thursday, May 18.PHOTO: AFP

SYDNEY/SINGAPORE (BLOOMBERG) - Asian markets were mixed on Friday (May 19) after US stocks rebounded with the US dollar. Caution remained in financial markets as a government crisis in Brazil raised the spectre of emerging-market risk.

Japanese stocks were little changed as the yen headed for its strongest week in a month, while Australia shares slipped. The S&P 500 Index clawed back part of the biggest selloff in eight months spurred by turmoil in US President Donald Trump's administration. Brazil's currency, shares and bonds tumbled amid calls for the country's leader to resign over an alleged cover-up.

Japan's Topix index increased 0.1 per cent as of 9:28am in Tokyo, after dropping 1.3 per cent on Thursday. The gauge is heading for a loss of 1.6 per cent for the week.

Australia's S&P/ASX 200 Index fell 0.3 per cent and South Korea's Kospi was flat.

S&P 500 futures added less than 0.1 per cent. The benchmark index rose 0.4 per cent on Thursday after plunging 1.8 per cent in the previous session, its worst day since Sept. 9. The Stoxx Europe 600 Index declined 0.5 per cent, paring a drop that reached 1.2 per cent.

Brazil's Ibovespa Index tumbled 8.8 per cent on Thursday, the most since October 2008, as political crisis returned to the country after last year's impeachment process.

Financial markets in the US stabilised as the administration sought to move past controversies surrounding Russia that have threatened to ensnare its plans for tax cuts and infrastructure spending. Risk sentiment was also helped by better-than-expected US jobless claims and regional manufacturing data.

Despite the rebound in the US, investors remain on alert. Wall Street has become more sensitive to Washington headlines as concerns grow over the strength of the global economy at a time when the Federal Reserve is considering further rate increases. The political upheavals were seen by some traders as a catalyst after global shares traded at an all-time high as recently as Tuesday.

"While investors will be relieved that yesterday's selling looks unlikely to be repeated today, it's too early to assume yesterday was a one-day wonder," Ric Spooner, a market strategist at CMC Markets, wrote in a note. "Markets have clearly decided that the US political situation has the potential to knock stock valuations off their relatively high perch."

The Bloomberg Dollar Spot Index was steady after increasing 0.3 per cent Thursday, reversing some of the selloff that took it to its lowest level since the US election. The gauge is down 1 per cent for the week.

The yen rose 0.1 per cent to 111.38 per dollar after falling 0.6 per cent on Thursday. The currency is up 1.7 per cent for the week, its strongest performance in a month.

The euro rose less than 0.1 per cent to US$1.1111 after dropping 0.5 per cent in the previous session. The pound rose 0.2 per cent to US$1.2957 after briefly jumping above US$1.30 on Thursday.

Brazil's real led declines among emerging-market currencies, slumping 7.5 per cent on Thursday. The Mexican peso ended down 0.3 per cent, paring an earlier drop of as much as 2.2 per cent after the central bank unexpectedly raised its key interest rate.

The yield on 10-year Treasuries was flat. It ended Thursday little changed at 2.23 per cent after earlier sliding to as low as 2.18 per cent.

Bonds of Brazil's state-controlled energy company Petroleo Brasileiro dropped by the most in six months amid the nation's political crisis.

Gold rose 0.2 per cent to US$1,249.03 an ounce after it fell 1.1 per cent on Thursday to reverse part of its five-day rally. The metal is up 1.6 per cent this week.

West Texas crude rose 0.2 per cent to US$49.46 as Opec members supported Saudi Arabian and Russian pledges to extend supply cuts. Oil is up 3.3 per cent for the past five days, heading for a second weekly gain.