Japanese yen weakens while investors remain cautious of the stuttering China recovery
30 June 2023 - 07:48
byAnkur Banerjee
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A screen showing various index figures during the London Metal Exchange (LME) Asia Metals seminar at the Hong Kong Connect Hall in Hong Kong on May 16 2023. Picture: Paul Yeung/Bloomberg
Singapore — Asian stocks eased on Friday after a set of strong US economic data bolstered the view that the Federal Reserve is likely to keep interest rates higher for longer, while the yen breached a psychologically important barrier amid intervention worries.
MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.21% but was on course to eke out a gain of more than 1% in the first half of the year.
Australia’s S&P/ASX 200 index lost 0.39%, while Japan’s Nikkei fell nearly 1%, but was easily the best performing Asian stock market with a 26% gain in the first six months of the year.
China shares have been on a rough ride, with investors cautious of the stuttering post-Covid-19 recovery as they wait for signs of a strong stimulus.
The country’s manufacturing activity contracted for a third straight month in June, albeit at a slower pace, an official factory survey showed on Friday.
China’s blue-chip CSI300 Index fell 0.14% and the Shanghai Composite index eased 0.11%. Hong Kong’s Hang Seng index slipped 0.28%, on course to clock a decline of 5% for the first half of the year.
Data through the week has painted a picture of a resilient US economy that has eased some of the worries of an impending recession but they have also stoked expectations that the Fed will stay on its hawkish path.
The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, pointing to continued labour market strength.
GDP increased at a 2.0% annualised rate last quarter, the commerce department said in its third estimate of first-quarter GDP on Thursday. Economists had expected first-quarter GDP growth would be raised slightly to a 1.4% pace.
Ryan Brandham, head of global capital markets, North America at Validus Risk Management, said the data highlights the continued resilience of the US consumer despite a long rate hiking cycle over the past 18 months.
The data “will have traders likely consider a greater likelihood of further interest rate hikes from the Fed.”
Markets are pricing in an 88% chance of the Fed raising rates by 25 basis points next month, according to CME FedWatch data.
Federal Reserve chair Jerome Powell signalled on Thursday that the US central bank was likely to resume its monetary tightening campaign after a break earlier this month.
“We did take one meeting where we didn’t move,” Powell said during an event held by the Spanish central bank in Madrid. “We expect the moderate pace of interest rate decisions to continue.”
The strong economic data sent Treasury yields higher, with the yield on 10-year Treasury notes touching a three-month high of 3.868% on Thursday. In Asian hours, it was at 3.840%.
The two-year US Treasury yield, which typically moves in step with interest rate expectations, was at 4.872%, having touched more than a three-month high of 4.892% overnight.
Investor focus on Friday will be on the US Personal Consumption Expenditures index reading, the Fed’s favoured inflation gauge.
In the eurozone, inflation data for May is likely to provide cues to the European Central Bank’s next moves.
“There is a growing divergence in the path of inflation across the region, which is leading to some disagreement about the right path for policy,” said Rob Carnell, ING’s regional head of research, Asia-Pacific.
“Though one suspects that the response will be, if in doubt, hike.”
Yen watch
Japanese authorities are under pressure to combat a continued yen fall driven by market expectations that the Bank of Japan will keep interest rates ultra-low, even as other central banks tighten monetary policy to curb inflation.
On Friday, the Japanese yen weakened to 145/$ for the first time since November as investors watch out for intervention from the Japanese authorities.
In a fresh warning, Japanese finance minister Shunichi Suzuki said on Thursday the country will not rule out any options in responding to currency market moves that become excessive, adding that one-sided, unstable yen moves were undesirable.
The dollar index, which measures the US currency against six rivals, rose 0.029%, with the euro down 0.01% to $1.0863.
US crude fell 0.21% to $69.71 per barrel and Brent was at $74.30, down 0.05% on the day.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Asian shares lose ground on US rate hike concerns
Japanese yen weakens while investors remain cautious of the stuttering China recovery
Singapore — Asian stocks eased on Friday after a set of strong US economic data bolstered the view that the Federal Reserve is likely to keep interest rates higher for longer, while the yen breached a psychologically important barrier amid intervention worries.
MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.21% but was on course to eke out a gain of more than 1% in the first half of the year.
Australia’s S&P/ASX 200 index lost 0.39%, while Japan’s Nikkei fell nearly 1%, but was easily the best performing Asian stock market with a 26% gain in the first six months of the year.
China shares have been on a rough ride, with investors cautious of the stuttering post-Covid-19 recovery as they wait for signs of a strong stimulus.
The country’s manufacturing activity contracted for a third straight month in June, albeit at a slower pace, an official factory survey showed on Friday.
China’s blue-chip CSI300 Index fell 0.14% and the Shanghai Composite index eased 0.11%. Hong Kong’s Hang Seng index slipped 0.28%, on course to clock a decline of 5% for the first half of the year.
Data through the week has painted a picture of a resilient US economy that has eased some of the worries of an impending recession but they have also stoked expectations that the Fed will stay on its hawkish path.
The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, pointing to continued labour market strength.
GDP increased at a 2.0% annualised rate last quarter, the commerce department said in its third estimate of first-quarter GDP on Thursday. Economists had expected first-quarter GDP growth would be raised slightly to a 1.4% pace.
Ryan Brandham, head of global capital markets, North America at Validus Risk Management, said the data highlights the continued resilience of the US consumer despite a long rate hiking cycle over the past 18 months.
The data “will have traders likely consider a greater likelihood of further interest rate hikes from the Fed.”
Markets are pricing in an 88% chance of the Fed raising rates by 25 basis points next month, according to CME FedWatch data.
Federal Reserve chair Jerome Powell signalled on Thursday that the US central bank was likely to resume its monetary tightening campaign after a break earlier this month.
“We did take one meeting where we didn’t move,” Powell said during an event held by the Spanish central bank in Madrid. “We expect the moderate pace of interest rate decisions to continue.”
The strong economic data sent Treasury yields higher, with the yield on 10-year Treasury notes touching a three-month high of 3.868% on Thursday. In Asian hours, it was at 3.840%.
The two-year US Treasury yield, which typically moves in step with interest rate expectations, was at 4.872%, having touched more than a three-month high of 4.892% overnight.
Investor focus on Friday will be on the US Personal Consumption Expenditures index reading, the Fed’s favoured inflation gauge.
In the eurozone, inflation data for May is likely to provide cues to the European Central Bank’s next moves.
“There is a growing divergence in the path of inflation across the region, which is leading to some disagreement about the right path for policy,” said Rob Carnell, ING’s regional head of research, Asia-Pacific.
“Though one suspects that the response will be, if in doubt, hike.”
Yen watch
Japanese authorities are under pressure to combat a continued yen fall driven by market expectations that the Bank of Japan will keep interest rates ultra-low, even as other central banks tighten monetary policy to curb inflation.
On Friday, the Japanese yen weakened to 145/$ for the first time since November as investors watch out for intervention from the Japanese authorities.
In a fresh warning, Japanese finance minister Shunichi Suzuki said on Thursday the country will not rule out any options in responding to currency market moves that become excessive, adding that one-sided, unstable yen moves were undesirable.
The dollar index, which measures the US currency against six rivals, rose 0.029%, with the euro down 0.01% to $1.0863.
US crude fell 0.21% to $69.71 per barrel and Brent was at $74.30, down 0.05% on the day.
Reuters
Asian stocks fall amid growth outlook fears
Asian stocks stumble on Fed’s hawkish tone
Asian stocks fall as China’s rate cut disappoints
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