Asian Stocks Dip as US Debate Unfolds, Yen Gains: Markets Wrap

(Bloomberg) — Asian stocks slipped Wednesday on growth concerns ahead of a US inflation report and as traders weighed the knock-on effects of the presidential debate. The yen strengthened after a Bank of Japan board member signaled more interest-rate increases.

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

In currencies, the dollar edged lower while the yen gained to its strongest level against the greenback since January after a Bank of Japan policy member said the central bank will continue to adjust the degree of easing in its policy settings if the economy and prices perform in line with expectations. Junko Nakagawa said financial conditions were still easy even if the BOJ hikes.

The match-up between between Vice President Kamala Harris and former President Donald Trump may give more clarity for traders who have been parsing campaign-trail language around tax proposals, government spending plans and policies on energy, electric vehicles, health care and more. The Treasury yield curve has steepened this year on concern that the US deficit will worsen, with Trump’s policies seen as potentially inflationary.

“How the debate plays out might impact market sentiment and cause some movement in the dollar, which would directly affect Asian exports and trade balances,” said Billy Leung, an investment strategist at Global X Management in Sydney. “A stronger dollar could hurt competitiveness for Asian exporters, while a weaker greenback might boost exports but raise inflation concerns across the region.”

In China, onshore stocks are on the verge of plummeting to a five-year low set in February, as gloomy sentiment pervades the market as nation’s piecemeal stimulus is increasingly falling short of lifting earnings and economy.

Markets will be looking 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. Market jitters are also expected to increase, with a three-month measure of implied volatility for a key Bloomberg dollar gauge near its highest mark since the March 2023 banking crisis.

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 0.2% as of 10:46 a.m. Tokyo time
• Nikkei 225 futures (OSE) fell 0.6%
• Japan’s Topix fell 0.6%
• Australia’s S&P/ASX 200 fell 0.3%
• Hong Kong’s Hang Seng fell 1%
• The Shanghai Composite fell 0.5%
• Euro Stoxx 50 futures were little changed

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%
• The euro rose 0.1% to $1.1036
• The Japanese yen rose 0.4% to 141.94 per dollar
• The offshore yuan rose 0.2% to 7.1223 per dollar
• The Australian dollar was little changed at $0.6657

Cryptocurrencies

• Bitcoin fell 0.6% to $57,202.41
• Ether fell 0.6% to $2,363.78

Bonds

• The yield on 10-year Treasuries was little changed at 3.64%
• Japan’s 10-year yield declined 3.5 basis points to 0.855%
• Australia’s 10-year yield declined two basis points to 3.89%

Commodities

• West Texas Intermediate crude rose 0.6% to $66.14 a barrel
• Spot gold rose 0.1% to $2,520.44 an ounce

This story was produced with the assistance of Bloomberg Automation.

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