Equities struggle and the dollar backtracks on the yen following a fall in treasury yields
05 February 2025 - 07:33
byWayne Cole
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.
A passerby walks past Japan's Nikkei stock prices quotation board outside a brokerage in Tokyo, Japan. File picture: ISSEI KATO/REUTERS
Sydney — Asian stock markets struggled to make headway on Wednesday as Wall Street futures took a knock from earnings disappointment, and the dollar backtracked on the yen following a fall in treasury yields.
Investors were also nonplussed by comments from President Donald Trump that the US would like to take over the war-ravaged Gaza Strip and develop it economically.
The suggestion came out of the blue and underlined the risk of more policy uncertainty and market volatility ahead.
The mood was helped a little when Beijing set a firm fix for its yuan, countering the concern it might allow the currency to slide to offset the effect of tariffs on its exports.
China has so far made a relatively restrained response to Trump’s added 10% in tariffs, announcing levies that covered just $14bn of US exports to China.
“The measures are fairly modest, at least relative to US moves, and have clearly been calibrated to try to send a message to the US without inflicting too much damage,” said Julian Evans-Pritchard, head of China economics at Capital Economics.
“The risk is that China’s retaliation proves too modest to exert any real pressure on the US to reverse tariffs, but sufficiently defiant to trigger a further escalation.”
A survey did show China’s services activity expanded at a slower pace in January, but analysts suspected much of that was due to the timing of the Lunar New Year holidays.
Chinese blue chips returned from holiday with a minor dip of 0.2%.
MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.6%, and South Korea’s main index bounced 1.2%. Japan’s Nikkei went flat as the yen rose broadly along with local bond yields.
Eurostoxx 50 futures fell 0.5%, while FTSE futures eased 0.2% and DAX futures 0.4% amid the lingering risk of US taxes on trade.
Yen rallies
Having bounced on Tuesday, Wall Street futures ran into selling when Alphabet earnings missed forecasts as it ramped up spending on capex. Its shares dived 7.6% in extended trading, wiping $192bn off its market capitalisation.
S&P 500 futures fell 0.4% and Nasdaq futures lost 0.5% in response. Results out Wednesday include Uber, Ford, Qualcomm and Walt Disney.
The delays to tariffs on Canada and Mexico had at least eased worries the Federal Reserve might be severely restricted in how far it could cut interest rates and prompted a bounce in fund futures.
Yields on two-year treasuries were back at 4.224% and off a peak of 4.282% hit on Monday.
The pullback in yields coincided with a retreat in the dollar from its peaks, with the dollar index down at 108.050 from Monday’s spike top of 109.880.
The euro firmed to $1.0380, a remarkable round trip from the two-year trough of $1.0125 struck at the start of the week. Likewise, the dollar had recoiled to C$1.4327 from a 22-year high of C$1.4792.
The dollar also slipped 0.7% on the Japanese yen to touch a seven-week low at ¥153.09, breaking support at ¥153.72.
Japanese government bond yields hit new multiyear highs after upbeat data on wages supported expectations of further tightening by the Bank of Japan this year.
In commodity markets, gold hit a record high at $2,848/oz aided in part by the pullback in the dollar and yields.
Oil prices were weighed by China’s tariffs on imports of US oil, but found support from reports Trump had restored his “maximum pressure” campaign on Iran in a bid to drive Iranian oil exports to zero.
Brent fell 35c to $75.85 a barrel, while US crude lost 22c to $72.48 a barrel.
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 battle after Wall Street futures sag
Equities struggle and the dollar backtracks on the yen following a fall in treasury yields
Sydney — Asian stock markets struggled to make headway on Wednesday as Wall Street futures took a knock from earnings disappointment, and the dollar backtracked on the yen following a fall in treasury yields.
Investors were also nonplussed by comments from President Donald Trump that the US would like to take over the war-ravaged Gaza Strip and develop it economically.
The suggestion came out of the blue and underlined the risk of more policy uncertainty and market volatility ahead.
The mood was helped a little when Beijing set a firm fix for its yuan, countering the concern it might allow the currency to slide to offset the effect of tariffs on its exports.
China has so far made a relatively restrained response to Trump’s added 10% in tariffs, announcing levies that covered just $14bn of US exports to China.
“The measures are fairly modest, at least relative to US moves, and have clearly been calibrated to try to send a message to the US without inflicting too much damage,” said Julian Evans-Pritchard, head of China economics at Capital Economics.
“The risk is that China’s retaliation proves too modest to exert any real pressure on the US to reverse tariffs, but sufficiently defiant to trigger a further escalation.”
A survey did show China’s services activity expanded at a slower pace in January, but analysts suspected much of that was due to the timing of the Lunar New Year holidays.
Chinese blue chips returned from holiday with a minor dip of 0.2%.
MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.6%, and South Korea’s main index bounced 1.2%. Japan’s Nikkei went flat as the yen rose broadly along with local bond yields.
Eurostoxx 50 futures fell 0.5%, while FTSE futures eased 0.2% and DAX futures 0.4% amid the lingering risk of US taxes on trade.
Yen rallies
Having bounced on Tuesday, Wall Street futures ran into selling when Alphabet earnings missed forecasts as it ramped up spending on capex. Its shares dived 7.6% in extended trading, wiping $192bn off its market capitalisation.
S&P 500 futures fell 0.4% and Nasdaq futures lost 0.5% in response. Results out Wednesday include Uber, Ford, Qualcomm and Walt Disney.
The delays to tariffs on Canada and Mexico had at least eased worries the Federal Reserve might be severely restricted in how far it could cut interest rates and prompted a bounce in fund futures.
Yields on two-year treasuries were back at 4.224% and off a peak of 4.282% hit on Monday.
The pullback in yields coincided with a retreat in the dollar from its peaks, with the dollar index down at 108.050 from Monday’s spike top of 109.880.
The euro firmed to $1.0380, a remarkable round trip from the two-year trough of $1.0125 struck at the start of the week. Likewise, the dollar had recoiled to C$1.4327 from a 22-year high of C$1.4792.
The dollar also slipped 0.7% on the Japanese yen to touch a seven-week low at ¥153.09, breaking support at ¥153.72.
Japanese government bond yields hit new multiyear highs after upbeat data on wages supported expectations of further tightening by the Bank of Japan this year.
In commodity markets, gold hit a record high at $2,848/oz aided in part by the pullback in the dollar and yields.
Oil prices were weighed by China’s tariffs on imports of US oil, but found support from reports Trump had restored his “maximum pressure” campaign on Iran in a bid to drive Iranian oil exports to zero.
Brent fell 35c to $75.85 a barrel, while US crude lost 22c to $72.48 a barrel.
Reuters
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.