Stocks Dip as Traders Digest US Debate, Yen Gains: Markets Wrap

(Bloomberg) — Asian stocks slipped Wednesday on growth concerns ahead of a US inflation report and as traders weighed the impact of the presidential debate. The yen rose after a Bank of Japan official signaled more interest rate increases.

Most Read from Bloomberg

A gauge for the region’s equities fell for a third session, with benchmarks in Japan and Hong Kong leading declines. Futures for US stocks dropped. Global growth worries resurfaced as oil steadied below $70 and Treasury yields fell in the run-up to the US consumer price index later Wednesday and the Federal Reserve policy meeting next week.

The yen gained to its strongest level against the greenback since January after BOJ policy member Junko Nakagawa said the central bank will continue to adjust the degree of easing. Most economists surveyed expected the central bank to wait until December or January before raising rates again, with the next decision scheduled for next week. Emerging market currencies gained against a weaker greenback.

The match-up between between Vice President Kamala Harris and former President Donald Trump ranged from their plans for the economy to US-China relations and immigration. As the debate closed, the odds for victory for Harris climbed to around 55% on PredictIt.

“Asian currencies are being buoyed by Nakagawa’s comments this morning, as well as indications that Harris is doing well in the debate as seen in the live betting odds,” said Alvin Tan, head of Asian currency strategy at Royal Bank of Canada in Singapore. “The market has long being worried about Trump’s tariff proposals, so a reduction in his chances is negative for the dollar”

Markets continued to look for cues on the future direction of US-China relations during the debate, with defense, biotechnology and banking companies in the region under the microscope. Trump’s support of the crypto sector saw Bitcoin slip as the former president’s odds for victory briefly dipped on PredictIt.

The Japanese currency rallied to 141.51 versus the greenback, the strongest level since Jan. 2. Nakagawa’s comments underpin the BOJ’s message that it will raise rates further if conditions are right, a stance signaled recently by BOJ board members including Governor Kazuo Ueda. The central bank announced an interest-rate hike and a reduction in bond purchases in its previous meeting on July 31.

Story continues

Nakagawa’s comments on real rates “make markets think the BOJ may hike rates earlier and faster, possibly this year,” pushing up the yen, said Shoki Omori, chief desk strategist at Mizuho Securities Co. “The presidential debate adds to uncertainty” over the market and contributing to the yen’s volatility, he said

Traders in the US interest-rate options market are still betting on at least one super-sized Fed interest-rate cut this year — just probably not before the Nov. 5 US election. Forecasters expect a monthly report on consumer prices to show another month of muted increases, possibly playing into a Fed debate over how much to cut interest rates.

“Given the market’s aggressive expectations for Fed rate cuts, a hotter reading should lead to downside volatility,” said Sameer Samana at Wells Fargo Investment Institute. “A cooler print has more two-way risk as it creates more room for the Fed to cut, but may also indicate the economy is slowing faster than anticipated.”

Crude has tumbled by almost a fifth so far this quarter on concerns that slowing growth in the US and China, the leading consumers, will crimp demand at a time of robust and expanding supplies. West Texas Intermediate crude rebounded in early trading after plummeting as much as 5% in its previous session. Copper and aluminum also fell after Chinese trade data offered evidence of weakening domestic demand for metals.

Back in the US, the S&P 500 rose 0.4% with a Bloomberg gauge of the “Magnificent Seven” megacaps jumping 1.5%. Tesla Inc. led gains in Wall Street megacaps on Tuesday and Oracle Corp. hit an all-time high. JPMorgan Chase & Co. sank more than 5% after tempering its earnings optimism and Bank of America Corp. said investment-banking results will come in lower than some expected.

Key events this week:

• US CPI, Wednesday

• Japan PPI, Thursday

• ECB rate decision, Thursday

• US initial jobless claims, PPI, Thursday

• Eurozone industrial production, Friday

• Japan industrial production, Friday

• U. Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.4% as of 11:18 a.m. Tokyo time

• Nikkei 225 futures (OSE) fell 0.8%

• Japan’s Topix fell 1%

• Australia’s S&P/ASX 200 fell 0.3%

• Hong Kong’s Hang Seng fell 1.3%

• The Shanghai Composite fell 0.8%

• Euro Stoxx 50 futures were little changed

• Nasdaq 100 futures fell 0.5%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%

• The euro rose 0.2% to $1.1042

• The Japanese yen rose 0.5% to 141.66 per dollar

• The offshore yuan rose 0.2% to 7.1191 per dollar

• The Australian dollar was little changed at $0.6658

Cryptocurrencies

• Bitcoin fell 1% to $56,992.66

• Ether fell 1% to $2,354.87

Bonds

• The yield on 10-year Treasuries declined one basis point to 3.63%

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

• Australia’s 10-year yield declined four basis points to 3.87%

Commodities

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Masaki Kondo and Marcus Wong.

Most Read from Bloomberg Businessweek

©2024 Bloomberg L.P.