A rally in Japanese shares lost momentum as the yen regained strength, potentially undermining a global equities recovery spurred by robust US labor market data. The Topix index’s gain narrowed to 0.6% from an earlier peak of 2% after the yen strengthened against the dollar. A stronger yen typically dampens Japan’s stock market by diminishing export competitiveness.
In other Asian markets, stocks remained positive from Australia to South Korea and Hong Kong, following a strong performance on Wall Street. Chinese shares flattened after an initial advance, as concerns emerged that better-than-expected inflation results were largely due to seasonal factors.
Euro Stoxx 50 futures edged higher, while US contracts were flat. The dollar weakened, and Treasury yields fell after a three-day increase. A stronger yen poses a challenge to risk appetite, coming just as favorable US jobless claims data eased recession fears following disappointing employment figures last week. Next week’s focus will shift to upcoming US economic indicators, including consumer prices.
Different signals from US central bank officials may also lead to investor caution. Federal Reserve Bank of Kansas City President Jeffrey Schmid expressed reluctance to support interest rate cuts while inflation remains above target. Swap traders have reduced bets on aggressive Fed easing in 2024, with current pricing suggesting approximately 40 basis points of cuts for September.
The yen’s recent gains followed BNY’s report on yen-funded carry trades and JPMorgan Chase & Co. strategists’ decision to lower year-end targets for Japan’s major stock indices due to the stronger yen.
Oil prices steadied after a Thursday rally amid ongoing Middle East tensions, while gold prices fell. In Canada, steel and aluminum producers urged Prime Minister Justin Trudeau to impose new tariffs on Chinese products to protect local jobs from a surge of imports.
Key Events This Week:
Germany CPI
Market Movements:
Stocks:
1.S&P 500 futures down 0.2%
2.Nasdaq 100 futures down 0.3%
3.Japan’s Topix little changed
4.Australia’s S&P/ASX 200 up 1%
5.Hong Kong’s Hang Seng up 1.4%
6.Shanghai Composite little changed
7.Euro Stoxx 50 futures little changed
Currencies:
1.Bloomberg Dollar Spot Index down 0.2%
2.Euro little changed at $1.0921
3.Japanese yen up 0.3% to 146.86 per dollar
4.Offshore yuan up 0.2% to 7.1688 per dollar
Cryptocurrencies:
1.Bitcoin up 2.3% to $60,881.85
2.Ether up 3.7% to $2,665.34
Bonds:
1.Yield on 10-year Treasuries down two basis points to 3.96%
2.Australia’s 10-year yield little changed at 4.06%
Commodities:
1.West Texas Intermediate crude little changed
2.Spot gold down 0.2% to $2,422.73 an ounce
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