Yen Climbs as BOJ in Focus; Asian Stocks Mixed: Markets Wrap

Publikuota: 2018-07-23
Women look at a screen showing stock information at a brokerage house in Shanghai, China July 6, 2018. REUTERS/Aly Song
Women look at a screen showing stock information at a brokerage house in Shanghai, China July 6, 2018. REUTERS/Aly Song
 

The yen climbed and Japanese government bonds slid on speculation that the Bank of Japan may debate some fine tuning in its stimulus policy. Asian stocks were mixed.

The rise in Japan’s 10-year benchmark bond yield matched the biggest increase since the central bank shifted the focus of its monetary stimulus to controlling the yield curve back in 2016. The BOJ’s offer to buy bonds at the first fixed-rate operation since February, in a sign it was trying to rein in yields, did little to appease investors with the yen and bond yields holding gains. With a potentially improved profit outlook from higher yields, Japanese banks and insurers rallied.

“I don’t think there is much chance that the BOJ would do anything to their current yield-curve control,” Takuji Okubo, chief economist at Japan Macro Advisors, said on Bloomberg Television. “There isn’t any immediate risk against the BOJ continuing on with its policy. I think it is just safe for the BOJ to just continue with what it has been doing and just wait for inflation to come up.”

Meanwhile, the dollar added to losses from Friday, when U.S. President Donald Trump said that he’s “ready to go” with additional tariffs and that China, the European Union and others have been manipulating their currencies. Equity benchmarks declined in Japan, Australia and South Korea, while they were little changed in Hong Kong and rose in China. European equity futures fell. The offshore yuan was steady after last week’s drop.

“The current U.S. administration has a clear preference for lower U.S. dollar rates and a weaker currency,” Australia & New Zealand Banking Group Ltd. strategists led by Daniel Been said in a note to clients Monday. “This will keep markets wary of further strength in the U.S. dollar; especially given the scale of the recent rally and the large long position already held by the market.”

The world’s finance chiefs warned on Sunday that trade tensions threaten global growth as the engines of leading economies fall out of sync. Also rattling investors, Trump took issue with the yuan’s six-week slide to the lowest level in more than year, raising concerns among investors that the U.S.-China trade war was now spilling over into currency markets. The yuan may be a key tool in China’s response to Trump, who continues to express dissatisfaction with America’s own monetary policy as his country’s currency strengthens.

The ratcheting up of trade rhetoric is offsetting a mixed earnings season that is gathering pace this week with technology companies and financial giants due to report.

Elsewhere, oil extended three weeks of declines amid concern the escalating trade rows will undercut energy demand, undermining reassurances from Saudi Arabia that it won’t flood global crude markets.

Here are some key events coming up this week:

Earnings season continues with the following tech companies among those reporting: Alphabet, Facebook, AT&T, Amazon.com, Twitter, Advanced Micro Devices, Qualcomm and Intel. They are joined by global financial giants Deutsche Bank, UBS, Nomura and Visa. Others include Halliburton, Michelin, Boeing, Lockheed, Nissan and Shell. Pakistan holds national elections Wednesday. European Central Bank’s policy decision Thursday. U.S. gross domestic product probably increased by about 4 percent at an annualized rate in the second quarter, the most since 2014, economists forecast ahead of Friday’s data.

These are the main moves in markets: Stocks

Japan’s Topix index fell 0.4 percent at the 3 p.m. close in Tokyo. South Korea’s Kospi index tumbled 1 percent. Hong Kong’s Hang Seng Index added 0.2 percent, while the Shanghai Composite Index climbed almost 1 percent. Futures on the S&P 500 Index were down 0.1 percent. Futures on the FTSE 100 fell 0.4 percent as of 7:01 a.m. in London. The MSCI Asia Pacific Index rose 0.1 percent.

Currencies

The yen jumped 0.4 percent to 110.96 per dollar. The offshore yuan was steady at 6.7810 per dollar. The euro climbed 0.1 percent to $1.1728. The Bloomberg Dollar Spot Index fell 0.1 percent after slumping 0.8 percent Friday, the most since March 21.

Bonds

The yield on 10-year Treasuries held around 2.89 percent after gaining six basis points on Friday. The yield on Japan’s 10-year government note was at 0.08 percent after jumping as much as six basis points to 0.09 percent. Australia’s 10-year bond yield rose six basis points to 2.68 percent.

Commodities

West Texas Intermediate  crude for September delivery fell 0.3 percent to $68.08 a barrel. Gold increased 0.1 percent to $1,230.26 an ounce.

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