(Bloomberg) — Asian equities fell as traders geared up for a week of political risks and inflation data which may help guide bets on the outlook for global interest rates.
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The Japanese yen was trading below 160 per dollar as top currency official Masato Kanda said authorities are ready to intervene to support it 24-hours a day, if needed. A gauge of Asian currencies was little changed.
European and US share futures were also softer after the S&P 500 fell on Friday.
The moves come as markets are at a critical juncture for positioning into the second half of 2024 with the outlook for central bank policy rates from New Zealand to Japan and the US unclear. Inflation prints in Australia and Tokyo, as well as the Federal Reserve’s preferred gauge of consumer costs, may yield clues, but political risks loom large.
“How the US dollar trades into month-end will be important to the direction of risk across markets,” said Bob Savage, head of markets strategy and insights at BNY Mellon in New York.
The first UK prime ministerial and US presidential debates are scheduled, and the first round of voting in the French legislative election is set to take place this weekend. This should “set the tone for fiscal risks,” Savage said.
China Weakness
China’s currency fixing was little changed at 7.1201 per dollar on Monday, after the country’s assets sold off again last week as policymakers showed no urgency to roll out more stimulus.
The yuan’s weakness is symptomatic of deteriorating sentiment toward the world’s second-largest economy, which is also seeing a bond market rally as investors seek out haven assets. Benchmark yields have tumbled toward record lows amid mixed economic data and expectations of further stimulus.
“In the short term, especially in the third quarter, we do see the CNY under more depreciation pressure,” Becky Liu, head of China macro strategy at Standard Chartered Plc, said in a Bloomberg TV interview.
Later this week, the Federal Reserve’s favored inflation yardsticks are poised to show the tamest monthly advances since late last year — which may pave the way for officials to begin lowering interest rates. Treasury 10-year yields were steady in Asian trading.
US equities fell on Friday, and traders and strategists began to question how long this year’s rally can persist given shifting bets on central bank rate cuts and election uncertainties in Europe.
The S&P 500 Index has likely logged most of the gains it will see this year as investors are growing increasingly nervous about the stock market’s rich valuations, according to the latest Bloomberg Markets Live Pulse survey published on Monday.
Signs of skittishness are evident as about half of survey takers say stocks will see the beginning of a correction of at least 10% this year.
“The bottom line is that the ongoing policy mix of heavy fiscal spending and tight interest rate policy is crowding out many companies and consumers in way that is unsustainable,” Morgan Stanley strategist Michael Wilson wrote in a note. “Investors have recognized this outcome by bidding up the few stocks of the companies that are doing well in this environment.”
In commodities, oil extended the previous session’s decline toward $80 a barrel amid a stronger greenback and a technical indicator suggesting the recent rally has gone too far. Gold was little changed, having racked up a loss the previous week as investors pared bets on US rate cuts.
Key events this week:
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BOJ issues Summary of Opinions from June policy meeting, Monday
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Singapore CPI, Monday
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Taiwan jobless rate, industrial production, Monday
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Argentina unemployment, GDP, Monday
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Bank of Canada Governor Tiff Macklem speaks, Monday
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San Francisco Fed President Mary Daly speaks, Monday
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Fed Governor Christopher Waller speaks, Monday
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Australia consumer confidence, Tuesday
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Malaysia CPI, Tuesday
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Canada CPI, Tuesday
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Spain GDP, Tuesday
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US Conference Board consumer confidence, Tuesday
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Fed Governor Lisa Cook, Fed Governor Michelle Bowman speaks, Tuesday
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Australia CPI, Wednesday
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UK Prime Minister Rishi Sunak and Labour leader Keir Starmer debate, Wednesday
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Bank of Finland’s 3rd International Monetary Policy Conference begins, Wednesday
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RBA Deputy Governor Andrew Hauser speaks, Thursday
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Japan retail sales, Thursday
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Philippines rate decision, Thursday
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China industrial profits, Thursday
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Eurozone economic confidence, consumer confidence, Thursday
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BOE releases financial stability report, Thursday
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Sweden rate decision, Thursday
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Turkey rate decision, Thursday
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US durable goods, initial jobless claims, GDP, wholesale inventories, Thursday
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Mexico unemployment, trade, rate decision, Thursday
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Japan Tokyo CPI, unemployment, industrial production, Friday
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UK GDP, Friday
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France CPI, Friday
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Italy CPI, Friday
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Spain CPI, Friday
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Czech Republic GDP, Friday
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US PCE inflation, spending and income, University of Michigan consumer sentiment, Friday
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Richmond Fed President Thomas Barkin speaks, Friday
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Brazil unemployment, Friday
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Chile industrial production, unemployment, Friday
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Colombia unemployment, rate decision, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.1% as of 12:58 p.m. Tokyo time
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Nikkei 225 futures (OSE) rose 0.3%
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Japan’s Topix rose 0.5%
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Australia’s S&P/ASX 200 fell 0.7%
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Hong Kong’s Hang Seng fell 1%
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The Shanghai Composite fell 0.7%
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Euro Stoxx 50 futures fell 0.2%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0692
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The Japanese yen was little changed at 159.69 per dollar
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The offshore yuan was little changed at 7.2890 per dollar
Cryptocurrencies
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Bitcoin fell 1.4% to $62,836.74
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Ether fell 0.9% to $3,401.54
Bonds
Commodities
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West Texas Intermediate crude was little changed
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Spot gold rose 0.2% to $2,325.63 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Aya Wagatsuma.
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