DOLLAR RETREATS WITH TREASURIES, YEN AS SHANGHAI STOCKS REBOUND

The dollar weakened with the yen and Treasuries as a late rally in Shanghai helped calm markets after Chinese trade data highlighted global demand concerns just one week before the Federal Reserve decides whether to increase U.S. interest rates.

A Bloomberg index tracking the dollar against major peers fell for the first time since Sept. 1, and the yield on 10-year U.S. notes rose three basis points. The yen reversed earlier gains that saw the Nikkei 225 Stock Average wipe out it 2015 advance. Nickel retreated in London after China’s August imports plunged 14 percent from a year earlier and exports slipped 6.1 percent. U.S. and European equity-index futures climbed.

“Globally everyone has had a very, very weak period of exports and economic growth,” said Sean Darby, Jefferies Group Inc.’s chief global equity strategist in Hong Kong. “It’s not just China, but also Taiwan, Korea, and most of Asia and emerging markets. China gets the focus because it’s the biggest, but in reality, no one is having a very good time out there.”

Demand for haven assets ebbed as Shanghai stocks rallied in a pattern that on recent occasions has been consistent with state intervention to prop up the nation’s equities. U.S. markets resume trading after Monday’s Labor Day break, with investors remaining confident the Fed will raise interest rates this year, even as they pare bets on it happening next week.

Stocks Retreat

The MSCI Asia Pacific Index slipped 0.3 percent by 7:48 a.m. in London, with the Nikkei 225 slumping 2.4 percent and the broader Topix index retreating 2 percent. Standard & Poor’s 500 Index futures added 1.2 percent from Friday levels. Contracts on the Euro Stoxx 50 Index climbed 0.6 percent.

The contraction in overseas sales was less than the 8.9 percent July slump. China last reported trade data on Aug. 10, the day before its yuan devaluation sparked a rout in emerging-market currencies and triggered more than $8 trillion of global equity losses.

The Shanghai Composite swung from a loss of 2.3 percent to a gain of 2.7 percent, with about 24 shares climbing for each one that declined. The Hang Seng China Enterprises Index climbed 2.9 percent, heading for only its second advance since August 13.

Yen Swings

Australia’s S&P/ASX 200 Index advanced 1.7 percent, led by energy stocks after Woodside Petroleum Ltd. made an offer for Oil Search Ltd. The Australian dollar strengthened 0.8 percent to 69.80 U.S. cents, rising for a second day.

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The yen strengthened as much as 0.4 percent to 118.86 per dollar before reversing as Shanghai surged. The euro added 0.4 percent to $1.1216, while the Swiss franc also gained 0.4 percent to 97.10 centimes per dollar.

The dollar was weaker against 14 of its 16 major peers, with the pound surging 0.6 percent toward a second straight advance. Futures traders have pared odds that the Fed will raise interest rates next week to 28 percent, from 38 percent at the end of last month, according to data compiled by Bloomberg.

source:Bloomberg