Asian stocks fall; Yuan and Yen Spotlight: Markets Wrap

(Bloomberg) – Asian equities were lower on Thursday as upward momentum in Japan faded and Chinese equities fell. The yen and yuan were also in focus as authorities in both countries expressed concerns about currency weakness.

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Traders continued to analyze hawkish comments from central bankers pointing to higher interest rates and positioned their portfolios for the end of the quarter.

Japan’s Nikkei 225 held its gain while the broader Topix index faltered. Hong Kong’s Hang Seng Index slipped more than 1%, led by tech companies, with Shanghai posting a smaller decline. Futures for US indices rose about 0.1%, while those for Europe were little changed.

Asian chipmakers made headway and provided a bright spot after memory maker Micron Technology Inc. issued an upbeat forecast suggesting the industry glut is easing even as the semiconductor maker continues to face challenges in China. South Korea’s SK Hynix Inc. rose, as did Micronics Japan Co. and Tokyo Electron Ltd.

An index of the dollar’s strength rose for a second day after Federal Reserve Chair Jerome Powell signaled the central bank could hike rates at the next two meetings after the June pause.

The offshore yuan slipped about 0.2%, even as China intervened for the third time this week to support the currency with a stronger-than-expected setting of its daily reference rate.

The yen has fluctuated in a narrow range as traders weighed comments from Bank of Japan Governor Kazuo Ueda. He struck a dovish tone on Wednesday about the near-term outlook for the monetary policy environment, while noting that it might be possible to start policy normalization if he is confident that inflation will pick up next year.

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Ueda and Powell’s comments were made at a forum in Portugal, where their European Central Bank counterpart Christine Lagarde said the ECB would hike rates next month if current trends continue.

On Wall Street, traders took Powell’s comments with equanimity as Treasury yields fell and US stocks faltered on Wednesday. Government bond yields rose on Thursday.

The tug-of-war within the S&P 500’s most influential group dominated Wednesday’s trading, with a decline in chipmakers followed by a rise in tech megacaps like Apple Inc. and Microsoft Corp.

After the closing bell, Bank of America Corp. and Wells Fargo & Co. applauded gains at financial firms as the largest lenders passed the Federal Reserve’s annual stress test and cleared the way for payouts.

Investors continue to debate the outlook for US equities and how well the economy will hold up under elevated interest rates. Strong US consumer confidence and home sales buoyed stocks earlier in the week.

“The economic surprise has really been one of the main reasons US equities have performed so well over the past few months,” Daniel Lam, head of equity strategy at Standard Chartered Wealth Management, told Bloomberg Television. “But as the hurdle gets higher and harder to clear, investors may shift to other regions like Japan and Asia.”

Frederic Neumann, chief Asia economist at HSBC Holdings Plc in Hong Kong, said markets had assumed the impact of tighter monetary policy would eventually have forced central banks to ease, but that view has so far caused disappointment.

“It’s very hard to imagine the fact that we raised interest rates so much over the last year and ultimately it wouldn’t have an impact on consumer balance sheets and the commercial real estate market,” he said on Bloomberg television.

Important events this week:

• Eurozone Economic Confidence, Consumer Confidence, Thursday

• US GDP, Initial Jobless Claims, Thursday

• Atlanta Fed President Rafael Bostic speaks Thursday

• China Manufacturing PMI, Non-manufacturing PMI, Balance of Payments, Friday

• US Personal Income and Expenditure, Consumer Sentiment at University of Michigan, Friday

Some of the key movements in the markets:

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• S&P 500 futures were up 0.1% as of 2:16 p.m. Tokyo time. The S&P 500 has barely changed

• Nasdaq 100 futures were up 0.2%. The Nasdaq 100 rose 0.1%

• Japan’s Topix has hardly changed

• Australia’s S&P/ASX 200 is little changed

• Hong Kong’s Hang Seng fell 1.3%

• The Shanghai Composite has hardly changed

• The Euro Stoxx 50 futures have hardly changed

• South Korea’s Kospi fell 0.2%

currencies

• The Bloomberg Dollar Spot Index rose 0.2%

• The euro fell 0.2% to $1.0887

• The Japanese yen was little changed at 144.57 per dollar

• The offshore yuan fell 0.3% to 7.2614 per dollar

• The British pound fell 0.1% to $1.2619

• The Australian dollar rose 0.1% to $0.6608

• The British pound fell 0.1% to $1.2619

cryptocurrencies

• Bitcoin rose 0.4% to $30,237.52

• Ether was up 0.6% to $1,841.86

Bind

• The 10-year government bond yield rose three basis points to 3.74%

• The 10-year Japanese government bond yield fell one basis point to 0.375%

• Australia’s 10-year yield rose five basis points to 3.92%

raw materials

• Spot gold fell 0.2% to $1,904.26 an ounce

• West Texas Intermediate Crude fell 0.6% to $69.14 a barrel

• Spot gold fell 0.2% to $1,904.24 an ounce

This story was created with the support of Bloomberg Automation.

– With support from Rita Nazareth and Catherine Bosley.

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