Asian stocks fall as US debate unfolds, yen rises: Markets in Brief

(Bloomberg) — Asian shares fell on Wednesday on growth worries ahead of a U.S. inflation report and as traders weighed knock-on effects from the presidential debate. The yen strengthened after a Bank of Japan executive signaled more rate hikes.

Most read from Bloomberg

A gauge of the region’s stocks fell for a third session, with benchmarks in Japan and Hong Kong leading the declines. Global growth concerns resurfaced as oil prices fell below $70 on Tuesday and Treasury yields fell ahead of the U.S. consumer price index later on Wednesday and the Federal Reserve’s policy meeting next week.

In currencies, the dollar fell slightly while the yen hit its highest level against the greenback since January after a Bank of Japan policy official said the central bank would continue to adjust the degree of easing in its policy settings if the economy and prices develop in line with expectations. Junko Nakagawa said financial conditions would remain easy even if the BOJ raises interest rates.

The matchup between Vice President Kamala Harris and former President Donald Trump could provide more clarity for traders who have been analyzing the campaign’s language around tax proposals, government spending plans and policies on energy, electric vehicles, health care and more. The Treasury yield curve has steepened this year on concerns that the U.S. deficit will worsen, with Trump’s policies seen as potentially inflationary.

“How the debate plays out could affect market sentiment and cause some movement in the dollar, which would directly impact Asian exports and trade balances,” said Billy Leung, an investment strategist at Global X Management in Sydney. “A stronger dollar could hurt the competitiveness of Asian exporters, while a weaker dollar could boost exports but increase inflation concerns across the region.”

In China, domestic stocks are poised to fall to a five-year low hit in February, amid market gloom as the country’s piecemeal stimulus package proves increasingly unsuccessful in boosting profits and the economy.

Markets will be looking for signals about the future direction of US-China relations during the debate, with the region’s defense, biotech and banking companies under scrutiny. Market jitters are also expected to rise, with a three-month measure of implied volatility for a key Bloomberg dollar gauge near its highest since the March 2023 banking crisis.

The story continues

Traders in the U.S. interest rate options market are still betting on at least one more super-sized rate cut by the Fed this year, but probably not before the Nov. 5 U.S. election. Forecasters expect a monthly consumer price report to show another month of muted gains, potentially playing a role in a Fed debate over how much to cut interest rates.

“Given the market’s aggressive expectations for Fed rate cuts, a warmer reading should lead to downside volatility,” said Sameer Samana of Wells Fargo Investment Institute. “A cooler print has more two-way risk because it creates more room for the Fed to cut, but could also signal that the economy is slowing faster than expected.”

Crude oil has fallen by almost a fifth so far this quarter on concerns that slowing growth in the US and China, the main consumers, will crimp demand at a time of robust and growing supplies. West Texas Intermediate crude recovered in early trading after falling as much as 5% in the previous session. Copper and aluminium also fell after Chinese trade data showed weakening domestic demand for the metals.

Back in the U.S., the S&P 500 rose 0.4%, with a Bloomberg gauge of the “Magnificent Seven” mega-caps jumping 1.5%. Tesla Inc. led gains among Wall Street mega-caps on Tuesday and Oracle Corp. hit a record high. JPMorgan Chase & Co. fell more than 5% after tempering its earnings optimism and Bank of America Corp. said investment banking results will be lower than some had expected.

Important events this week:

• US CPI, Wednesday

• Japan PPI, Thursday

• ECB interest rate decision, Thursday

• US initial jobless claims, PPI, Thursday

• Eurozone industrial production, Friday

• Japan Industrial Production, Friday

• US Consumer Confidence, Michigan, Friday

Some of the major moves in the markets:

Shares

• S&P 500 futures were down 0.2% at 10:46 a.m. Tokyo time

• Nikkei 225 futures (OSE) fell 0.6%

• Japan’s Topix fell 0.6%

• Australia’s S&P/ASX 200 fell 0.3%

• Hong Kong’s Hang Seng fell 1%

• The Shanghai Composite fell 0.5%

• Euro Stoxx 50 futures were little changed

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%

• The euro rose 0.1% to $1.1036

• The Japanese yen rose 0.4% to 141.94 per dollar

• The offshore yuan rose 0.2% to 7.1223 per dollar

• The Australian dollar remained virtually unchanged at $0.6657

Cryptocurrency

• Bitcoin fell 0.6% to $57,202.41

• Ether fell 0.6% to $2,363.78

Bonds

• The yield on 10-year government bonds remained virtually unchanged at 3.64%

• Japan’s 10-year yield fell 3.5 basis points to 0.855%

• The Australian 10-year yield fell two basis points to 3.89%

Raw materials

• West Texas Intermediate crude rose 0.6% to $66.14 a barrel

• Spot gold rose 0.1% to $2,520.44 an ounce

This story was produced with the help of Bloomberg Automation.

Most read from Bloomberg Businessweek

©2024 Bloomberg LP