Asian stocks extend global slump, yen perks at signs of intervention

An electronic stock trading board is displayed inside a conference room in Tokyo, Japan November 1, 2021. REUTERS/Issei Kato

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  • Nikkei falls 2.3%, S&P 500 futures stabilize
  • The dollar falls 0.6% against the yen on the news of the BoJ rate control
  • US 2-year yields climb to new 15-year high of 3.8040%
  • US yield curve remains deeply inverted

SYDNEY, Sept 14 (Reuters) – Asian stocks fell on Wednesday as U.S. data dashed hopes of an immediate spike in inflation, although the dollar halted its relentless run against the yen as Japan gave its signal. stronger but was not happy with the currency’s sharp declines. .

Data on Tuesday showed the US consumer price index gained 0.1% on a monthly basis versus expectations for a 0.1% drop. In particular, core inflation, excluding volatile food and energy prices, doubled to 0.6%. read more

Wall Street saw its steepest drop in two years, the safe-haven dollar posted its biggest jump since early 2020 and two-year Treasury yields, rising on traders’ expectations of higher US rates. federal funds, jumped to the highest level in 15 years. .

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The fall in equities is set to weigh on European markets, with pan-regional Euro Stoxx 50 futures, German DAX futures and FTSE futures all down more than 0.7%.

In Asia, MSCI’s broadest index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) fell 2.2% on Wednesday, dragged lower by a 2.4% drop in Australia, heavily resourced (.AXJO)a 2.5% drop in Hong Kong’s Hang Seng Index (.HSI) and a 1.5% drop in Chinese bluechips (.CSI300).

japan nikkei (.N225) fell 2.6%.

After a sharp sell-off in stocks overnight, both S&P 500 and Nasdaq futures were up 0.2%.

“Markets have reacted violently to what I would consider a modest misstep in the US CPI,” said Scott Rundell, chief investment officer at Mutual Limited.

“Futures have flattened out so we could see an unexpected bounce tonight.”

Financial markets have now fully priced in an interest rate hike of at least 75 basis points at the end of the Fed’s monetary policy meeting next week, with a 38% chance of a whopping percentage point hike. full on the Federal Reserve funds target. rate, according to CME’s FedWatch tool.

A day earlier, the probability of a 100bp rise was zero.

“USD rates are now discounting a 4.25% fed funds rate by the end of 2022 (75 bps, 75 bps, 25 bps for the remaining three meetings). Also reflecting decent odds of a 4.5 spike % in early 2023,” said Eugene Leow, senior rates strategist at Deutsche Bank.

“While resilient growth and slowing inflation may make for a better risk-taking environment, the US economy now looks too hot still. With no clear signs of a slowing labor market and inflation remains problematic, it looks like a Fed downgrade will be delayed again.

A strong US dollar pressured the rate-sensitive Japanese yen near its 24-year low at 149.96 yen before giving back some of the gains on news that the Bank of Japan has conducted a rate check on apparent preparation for monetary intervention. read more

Yen buying intervention is rare. The last time Japan stepped in to support its currency was in 1998, when the Asian financial crisis triggered a yen selloff and rapid capital outflow.

Earlier in the day, Japanese Finance Minister Shunichi Suzuki said currency intervention was among the options the government would consider. read more

The dollar was now hovering around 143.7 yen, down 0.6% on the day.

Many traders doubted that intervention was imminent, but the jump in the yen pointed to increased nerves. The timing of the BOJ move also suggests that 145 per dollar will be an important level for markets and authorities.

The two-year US Treasury yield climbed to a new 15-year high of 3.8040% on Friday before retreating to 3.7629%, with its curve gap to the benchmark 10-year yield widening. widened to around 34 basis points, compared to just 16 basis points a year. a week ago.

The inversion of the yield curve is usually treated as a recession warning.

The yield on the 10-year Treasury note was flat at 3.4178%.

Oil prices fell on Friday. US crude fell 0.6% to $86.82 a barrel and Brent crude fell by a similar margin to $92.65.

Gold was slightly higher. Spot gold traded at $1703.02 per ounce.

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Information from Stella Qiu; Edited by Stephen Coates, Ana Nicolaci da Costa and Sam Holmes

Our standards: The Thomson Reuters Trust Principles.

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