Asian Stocks Falter as Japan Warns on Yen Moves: Markets Wrap

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(Bloomberg) — Asian stocks fell, starting a week with inflation measures that will help guide bets on the outlook for global interest rates. The yen stabilized after Japan’s top currency official stepped up the interventionist tone.

The region’s stock index is set to decline for a third session on Monday, with stocks in South Korea falling and stocks in Japan swinging between gains and losses. Hong Kong stock futures pointed to declines while US stock futures remained flat after the S&P 500 fell on Friday amid large options expirations.

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These moves come as markets go through a critical phase of consolidation in the second half of 2024 with unclear expectations regarding interest rates in central banks from New Zealand to Japan and the United States. Inflation rates in Australia and Tokyo as well as the Federal Reserve’s preferred measure of consumer costs may help, after data showed US services activity rose at the fastest pace in more than two years.

There was little change in the US currency while the price of the Japanese yen fell to less than 160 yen to the dollar, with Masato Kanda saying that officials are ready to intervene to support the currency 24 hours a day, if necessary. Traders are concerned about the escalation in official statements after the yen fell 1.6% this month, while retail investors appear to be reloading their bets on the recovery.

“We believe the next round of intervention is likely to come after the yen triggers buy orders above the late April high of 160.20,” said Tony Sycamore, market analyst at IG Australia in Sydney.

China’s currency stabilization is likely to be the focus of much interest for investors on Monday, after the country’s assets sold off again last week as policymakers showed no urgency to roll out more stimulus. The yuan fell to its lowest level in seven months, and the benchmark Shanghai Composite Index fell below the 3,000 level on Friday for the first time since March. The measure of Asian currencies against the dollar is approaching its lowest levels since November 2022.

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Separately, China and the European Union agreed to start talks on the bloc’s plans to impose tariffs on electric cars imported from the Asian country.

This week, while analyzing inflation data, traders will also be watching political risks rise. The first debate between the British Prime Minister and the American President is scheduled to take place, and the first round of voting in the French legislative elections is scheduled to take place at the end of next week.

“While the debate may not spark market volatility, it will be symbolic because it is the first live US debate since 1960, and Biden will be out to prove a point to American voters,” said Chris Weston, head of research at Pepperstone Group in Washington. Melbourne. “When the gloves are off, it could get ugly on the podium, and we’re watching to see if the debate affects the ballot.”

10-year Treasury yields remained steady in Asia after closing little changed at 4.26% on Friday after S&P Global’s June primary manufacturing and services PMIs beat estimates. Strong data unraveled the previous rally in Treasuries after weak European PMI data. France’s risk premium over Germany closed at its highest levels since 2012.

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Triple magic

The S&P 500 fell 0.2% on Friday as $5.5 trillion in options were estimated to expire during the quarterly event known as the “triple witch.” Nvidia Corp played an additional role, as the value of contracts tied to the chipmaker became the second-largest underlying asset, trailing only the S&P 500.

Traders and strategists are beginning to wonder how long the rally could last this year as bond and currency markets fluctuate from shifting bets on central bank interest rate cuts and uncertainty over elections in Europe. A gauge of global stocks rose 2.3% this quarter, heading for a third straight quarterly gain, while US stocks hit new highs this month amid the artificial intelligence craze.

At the equity level, a correction has already begun to take hold as market breadth is very weak with momentum for a few stocks continuing almost unabated, according to Morgan Stanley. This could continue into the second half until there is a change in the overall outlook, such as inflation signaling a need for a rate hike or growth slowing meaningfully, chief U.S. equity strategist Michael Wilson wrote in a note to clients on Sunday.

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In commodities, oil continued its decline on Friday towards $80 per barrel amid the strength of the dollar and a technical indicator indicating that the recent rise has gone too far. Gold fell amid rethinking expectations of interest rate cuts by the Federal Reserve.

Main events this week:

• The Bank of Japan releases a summary of views from its June policy meeting on Monday
• Singapore Consumer Price Index, Monday
• Taiwan unemployment rate, industrial production, Monday
• Argentina Unemployment, GDP, Monday
• Bank of Canada Governor Tiff Macklem speaks Monday
• San Francisco Federal Reserve Bank President Mary Daly speaks Monday
• Federal Reserve Governor Christopher Waller speaks Monday
• Australian consumer confidence, Tuesday
• Malaysian Consumer Price Index, Tuesday
• Canadian Consumer Price Index, Tuesday
• Spanish GDP, Tuesday
• Consumer confidence index issued by the US Conference Board, Tuesday
• Fed Governor Lisa Cook and Fed Governor Michelle Bowman speak on Tuesday
• Australian Consumer Price Index, Wednesday
• A debate between British Prime Minister Rishi Sunak and Labor Party leader Keir Starmer, Wednesday
• The third international monetary policy conference of the Bank of Finland begins on Wednesday
• Reserve Bank of Australia Deputy Governor Andrew Hauser speaks on Thursday
• Retail sales in Japan, Thursday
• Interest rate decision in the Philippines, Thursday
• Industrial profits in China, Thursday
• Eurozone economic confidence, consumer confidence, Thursday
• The Bank of England releases its financial stability report on Thursday
• Interest rate decision in Sweden, Thursday
• Interest rate decision in Türkiye, Thursday
• US Durable Goods, Initial Jobless Claims, GDP, Wholesale Inventories, Thursday
• Mexico unemployment, trade, interest rate decision, Thursday
• Japan, Tokyo CPI, unemployment, industrial production, Friday
• UK GDP, Friday
• French CPI, Friday
• Consumer price index in Italy, Friday
• Spanish Consumer Price Index, Friday
• Czech Republic GDP, Friday
• US PCE Inflation, Spending and Income, University of Michigan Consumer Confidence, Friday
• Richmond Fed President Thomas Barkin speaks Friday
• Unemployment in Brazil, Friday
• Chile Industrial Production, Unemployment, Friday
• Unemployment in Colombia, interest rate decision, Friday

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Some key movements in the markets:

Stores

• S&P 500 futures were little changed as of 9:20 a.m. Tokyo time
• Hang Seng futures fell 0.3%
• Japan’s Topix index rose 0.3%.
• Australia’s S&P/ASX 200 index fell 0.2%.
• Euro Stoxx 50 futures fell 0.7%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• There was little change in the euro at $1.0688
• There was little change in the Japanese yen at 159.88 to the dollar
• There was little change in the yuan in external transactions at 7.2913 to the dollar
• There was little change in the Australian dollar at 0.6637 US dollars

Digital currencies

• Bitcoin fell 1 percent to $63,056.27
• Ethereum fell 0.4% to $3,419.03

Bonds

• The yield on 10-year Treasury bonds was little changed at 4.25%.
• The 10-year Australian bond yield was little changed at 4.21%.

Goods

• West Texas Intermediate crude fell 0.4% to $80.39 a barrel
• There was little change in spot gold

This story was produced with assistance from Bloomberg Automation.

-With assistance from Aya Wagatsuma.

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