Japanese Stocks Fall On Yen Support, Yuan Rebounds: Markets Wrap

(Bloomberg) -- Japanese stocks fell as the yen rose after the country’s top currency official warned against speculative moves in the foreign-exchange market. The yuan climbed following signs of support from Chinese authorities.

Tokyo’s Topix index fell as much as 1% after recording its biggest weekly gain in two years. South Korea’s equity benchmark also fell while mainland Chinese, Hong Kong and Australian shares inched higher — offering a mixed picture for the region.

The offshore yuan rose as the dollar weakened and China’s central bank set a stronger-than-expected daily reference rate. The gap between the yuan’s daily fixing versus estimates was the widest since November, while Bloomberg calculations indicated the People’s Bank of China injected a net 40 billion yuan ($5.56 billion) in open market operations.

Chinese Premier Li Qiang had earlier downplayed investor concerns of challenges facing the economy, saying Beijing was stepping up policy support to spur growth and systemic risks are being addressed.

“Just saying the risks are not as much as people think is not going to draw investors back,” says Vey-Sern Ling, managing director at Union Bancaire Privee. “China is not just a ‘show me’ story for investors, it’s a ‘show me a lot more than I expect’ story.”

Treasuries were mostly steady following a rally on Friday that wiped seven basis points from the 10-year yield. Australian and New Zealand bond yields ticked lower Monday. 

Those moves come ahead of a busy week of economic data that will include the Federal Reserve’s preferred inflation gauge due Friday. The core personal consumption expenditures index, which excludes food and energy costs, is seen rising 0.3% on the heels of its biggest monthly increase in a year.

Inflation readings are also due in Australia, France, Italy and Spain later this week, offering clarity on rising prices as investors begin to position for rate cuts.

US equity futures were little changed after a muted end to the week on Wall Street with the S&P 500 declining 0.1% and the Nasdaq index rising by the same margin on Friday.

The recent advances for the dollar reflect a shift in investor thinking about the world’s reserve currency. At the start of the year, many expected the dollar to weaken against its peers as the Fed edged closer to rate cuts. Now, the prospect that other developed market central banks will also cut has rekindled the currency’s appeal.

“Tightening usually causes recessions when it triggers financial crises that turn into credit crunches,” said Ed Yardeni, president of his eponymous research firm, said in a Monday note. “That sequence of events is unlikely now,” he said, citing the Fed’s use of emergency liquidity measures to address crises, such as the stress in the US banking system in March last year.

Forecasts for Fed cuts have spurred renewed interest in the so-called bond steepener trade, where investors load up on short-dated US bonds that offer attractive short-term price appreciation as rates fall.

In commodities, oil advanced after a three-day drop on signs of a tightening market driven by sanctions, geopolitical risks, and OPEC+ supply cuts. Gold edged higher, extending a weekly gain.

Key events this week:

• US new home sales, Monday
• Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic speak, Monday
• Australia consumer confidence, Tuesday
• Spain GDP, Tuesday
• Hungary interest rate decision, Tuesday
• ECB chief economist Philip Lane appearance, Tuesday
• Australia CPI, Wednesday
• China industrial profits, Wednesday
• Eurozone economic, consumer confidence, Wednesday
• Russia industrial production, Wednesday
• South Africa interest rate decision, Wednesday
• Sweden interest rate decision, Wednesday
• Bank of Japan board member Noaki Tamura speaks, Wednesday
• Bank of England issues financial policy committee minutes, Wednesday
• ECB executive board members Frank Elderson, Piero Cipollone speak, Wednesday
• Fed Governor Christopher Waller speaks, Wednesday
• Australia retail sales, private credit, Thursday
• Brazil unemployment, Thursday
• Chile unemployment, industrial production, Thursday
• Czech Republic GDP, Thursday
• Germany unemployment, Thursday
• Sri Lanka trade, CPI, Thursday
• UK GDP revision, Thursday
• US consumer sentiment, jobless claims, GDP, Thursday
• French President Emmanuel Macron travels to Brazil, Thursday
• Exchanges closed in US and many other countries in observance of Good Friday holiday, Friday
• Vietnam CPI, industrial production, retail sales, trade, Friday
• France CPI, Friday
• Italy CPI, Friday
• Poland CPI, Friday
• Japan unemployment, Tokyo CPI, industrial production, retail sales, Friday
• South Africa trade balance, Friday
• South Korea industrial production, Friday
• Thailand trade, Friday
• US personal income and spending, wholesale inventories, Friday
• Fed Chair Jerome Powell speaks in a livestreamed discussion
• San Francisco Fed President Mary Daly speaks, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 12:25 p.m. Tokyo time
• Nikkei 225 futures (OSE) fell 0.7%
• Japan’s Topix fell 0.8%
• Australia’s S&P/ASX 200 rose 0.6%
• Hong Kong’s Hang Seng rose 0.7%
• The Shanghai Composite rose 0.5%
• Euro Stoxx 50 futures rose 0.1%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro rose 0.1% to $1.0819
• The Japanese yen rose 0.1% to 151.19 per dollar
• The offshore yuan rose 0.5% to 7.2369 per dollar
• The Australian dollar rose 0.4% to $0.6539

Cryptocurrencies

• Bitcoin rose 1.1% to $66,854.71
• Ether rose 0.9% to $3,442.5

Bonds

• The yield on 10-year Treasuries was little changed at 4.21%
• Japan’s 10-year yield was unchanged at 0.740%
• Australia’s 10-year yield declined three basis points to 4.00%

Commodities

• West Texas Intermediate crude rose 0.8% to $81.25 a barrel
• Spot gold rose 0.4% to $2,173.48 an ounce

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Zhu Lin.

©2024 Bloomberg L.P.