Asia Stocks Set to Get Boost From Japan; Yen Slips: Markets Wrap

Sunil Jagtiani
·3 min read

(Bloomberg) -- Asian stocks looked set to climb early Monday as traders digested the outcome of Japan’s election and fresh all-time highs for U.S. shares. The yen weakened and a dollar gauge was steady.

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Futures advanced about 1% for Japan, where Prime Minister Fumio Kishida’s Liberal Democratic Party preserved its outright majority, avoiding worst-case scenarios suggested by opinion polls. Australian shares pushed higher, while futures for Hong Kong slipped. U.S. contracts rose following records for the S&P 500 and Nasdaq 100 on overall optimism about corporate earnings.

Data from China injected a note of caution. Purchasing managers’ indexes signaled further economic weakness due to power shortages, surging commodity prices and strict Covid controls.

Traders are awaiting central bank meetings in the U.S, the U.K. and Australia this week. The Federal Reserve is expected to decide to scale back its bond-purchase program. Short-term bond yields from Canada to Australia have jumped on bets that monetary authorities will also have to hike interest rates eventually to curb inflationary pressures. Longer-term yields fell in Australia and New Zealand.

Fixed-income market upheavals suggest investors anticipate a slowdown in the recovery from the pandemic as price pressures lead central banks to pare back economic support. Global shares have so far shrugged off such risks and remain close to all-time peaks.

“Having been bullish on equities it feels right to turn a touch more cautious this week,” Chris Weston, head of research at Pepperstone Financial Pty, wrote in a note. “Although, the fact that equities have held up so well considering the rapid re-pricing of interest rates is certainly a positive.”

The stress in China’s property sector also remains in focus. At least four developers defaulted on bonds last month. China Evergrande Group twice averted that fate by paying overdue coupons at the 11th hour.

Meanwhile, crude oil retreated as pressure mounts on OPEC+ to boost production when it meets on Thursday. China released state reserves of diesel and gasoline to ease shortages.

Here are some events to watch this week:

  • Earnings continue, including Airbnb, BMW, BP, Honda Motor, KKR, Moderna, Peloton, Pfizer, Pinterest, Qualcomm, SoftBank, Toyota Motor, Uber

  • China Caixin manufacturing PMI, Markit manufacturing PMIs for a number of countries, Monday

  • Reserve Bank of Australia policy decision, Tuesday

  • FOMC rate decision and Fed Chair news conference, U.S. factory orders, U.S. durable goods, Wednesday

  • OPEC+ meeting on output, Thursday

  • Bank of England announces interest-rate and bond-buying program decisions, Thursday

  • U.S. unemployment, nonfarm payrolls, Friday

For more market analysis, read our MLIV blog.

Stocks

  • S&P 500 futures rose 0.2% as of 8:03 a.m. in Tokyo. The S&P 500 rose 0.2%

  • Nasdaq 100 futures climbed 0.2%. The Nasdaq 100 rose 0.5%

  • Nikkei 225 futures rose 1.1%

  • Australia’s S&P/ASX 200 added 0.4%

  • Hang Seng futures fell 0.6% earlier

Currencies

  • The Bloomberg Dollar Spot Index was steady

  • The euro was at $1.1561

  • The Japanese yen was at 114.15 per dollar, down 0.2%

  • The offshore yuan was at 6.4075 per dollar

Bonds

  • The yield on 10-year Treasuries declined three basis points to 1.55% Friday

Commodities

  • West Texas Intermediate crude fell 0.7% to $82.95 a barrel

  • Gold was at $1,781.08 an ounce, slipping 0.1%

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