published Dec 14, 2017, 7:48:06 PM, by Adam Haigh
(Bloomberg) —
Stocks in Asia declined and the dollar headed for its first weekly drop this month as investors assessed messages from Federal Reserve and European Central Bank meetings this week and amid lingering concerns about the Republican tax overhaul package.

In Tokyo, the Topix index fell and was poised for its first weekly slide in four. Equities also dropped in Hong Kong, China and Australia after U.S. shares slid. The greenback remained under pressure after Republican Senator Marco Rubio threatened to opposed the tax legislation unless Senate leaders agree to a larger child tax credit. The euro held onto a retreat after the ECB remained cautious about the prospects of reaching its inflation goals, even as it reiterated a pledge to keep stimulus in place.

Uncertainty surrounding the fate of U.S. tax reform is threatening to sour what’s been a stellar run for equities in 2017 as money managers dial back their appetite to take risk amid signs that the eight-year stock rally may not be far from its end. Pacific Investment Management Co. sees the good times rolling on in 2018 as global economies grow in sync, but the bond giant warned investors to brace for a downturn.

ECB President Mario Draghi sounded cautious about the prospect of inflation picking up even as economic growth remains robust. Draghi stopped short of saying the ECB will meet its 2 percent inflation goal in 2020 as he unveiled updated economic projections that showed continued growth over the next three years. The Fed earlier this week raised rates and kept its projection for three hikes next year, while saying it’s closely monitoring inflation developments.

Nader Naeimi, head of dynamic markets at AMP Capital, said that inflation will eventually pick up with global growth, given that there are signs of wages growth in places like the U.S. and Japan.

“2017 was the first year that we’ve had synchronized global growth and inflation is a lagging indicator and now with developed market unemployment rate at a 40-year low, it’s a matter of time,” Naeimi told Bloomberg Television. “Not only investors, but the central banks, will be surprised that inflation will appear sooner than expected. It would be quite complacent to give up on the idea that with growth there will be inflation at some point.”

Confidence among Japan’s big manufacturers has improved to the highest level in a decade as the global economy continues to underpin exports and corporate profits. Sentiment among large manufacturers rose to 25 from 22 three months ago, the highest level since 2006, according to the quarterly Tankan survey released by the Bank of Japan on Friday.

Friday’s remaining key event:

Russia decides on monetary policy. Policy makers will deliver their second straight quarter-point cut on Friday, bringing the benchmark to 8 percent, according to all 33 analysts surveyed by Bloomberg.
And these are the main moves in markets:

Stocks

The Topix index fell 1 percent, dragged lower by telecommunication and technology stocks and banks, as of 10:44 a.m. in Tokyo. The Nikkei 225 Stock Average declined 0.9 percent. Australia’s S&P/ASX 200 Index fell 0.3 percent and the Kospi index rose 0.4 percent. Hong Kong’s Hang Seng Index dropped 0.8 percent and the Shanghai Composite Index lost 0.4 percent. Futures on the S&P 500 Index fell less than 0.1 percent. The underlying measure dropped 0.4 percent. The MSCI Asia Pacific Index declined 0.6 percent.

Currencies

The Bloomberg Dollar Spot Index rose less than 0.1 percent. It’s down 0.4 percent this week. The yen rose 0.1 percent to 112.27 per dollar, heading for its strongest week in a month. The euro was little changed at $1.1780. The pound was steady at $1.3435.
Bonds

The yield on 10-year Treasuries held at 2.35 percent. Australia’s 10-year yield declined four basis points to 2.52 percent.

Commodities

West Texas Intermediate crude added 0.1 percent to $57.09 a barrel. Gold traded at $1,253.64 an ounce.