Asia Stocks Drop as Japan Tumbles on Stronger Yen: Markets Wrap


(Bloomberg) — Asian stocks fell Monday, dragged lower by Japanese shares as mounting speculation the nation’s central bank will raise interest rates boosted the yen.

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The Topix index of Japanese equities slid 3%, the biggest drop since March last year. Chip stocks within the benchmark slumped in a move that echoed pressure on AI-related firms seen on Friday in the US, when Nvidia Corp. slipped 5.6%. Shares in Australia and South Korea also declined, sending a gauge of regional stocks down after three days of advances.

In Japan, economic growth expanded in the fourth quarter, supporting expectations that the Bank of Japan will raise interest rates for the first time since 2007 as soon as this month. Declines for Japanese shares partly reflected the stronger yen, which typically acts as a headwind for the country’s equities.

The yen extending last week’s 2% rally against the dollar — its best weekly gain since July. The currency looks poised to test the 145 per dollar mark and a break of that level may spur a quick move toward 140, according to Amir Anvarzadeh, a strategist at Asymmetric Advisors Pte Ltd.

“The market’s reaction seems to suggest that a lot has been riding on weak yen to continue to support multinationals rather than bets on changing corporate governance, which has been the trigger behind the more positive Japan narrative,” he said.

Investors are now on the watch for whether the BOJ will buy exchange-traded funds after the Topix fell more than 2%. The last time the central bank purchased ETFs was in October, when the index dropped by a similar amount the morning trading session.

Read more: World’s Negative Interest Rate Experiment Nears Its End in Japan

Chinese equities ran against the gloom to trade higher, with solar shares extending their recent gains amid speculation the government will relax caps on renewable installation, improving the outlook for the sector. Shares also rose on report that Chinese regulators met financial institutions to ask large banks to enhance financing support for the property developer.

US futures declined following falls on Wall Street at the end of last week, where both the S&P 500 and the Nasdaq 100 slipped. Treasuries traded steady.

Soft Landing

Tuesday’s US consumer price index figures will dominate the economic data reports this week. The core prices gauge is seen rising 0.3% in February from a month earlier, and 3.7% on a year-over-year basis — which would be the smallest annual rise since April 2021.

Further moderation in US prices would support the disinflation narrative that broadly remains in tact, despite a pullback in the number of Federal Reserve rate cuts expected this year. Swaps pricing shows three cuts are anticipated in 2024, down from six at the start of the year.

In commodities, gold rose toward a record on Fed outlook, while oil held a loss ahead of reports from OPEC and the IEA this week that may provide clues on the demand outlook.

An index of the dollar was weaker after falling 1% last week — the worst weekly showing since December.

Key Events This Week:

  • CPI reports for Argentina, Brazil, Germany, India, US, Tuesday

  • UK jobless claims, unemployment, Tuesday

  • Japan PPI, Tuesday

  • India industrial production, Tuesday

  • Mexico international reserves, industrial production, Tuesday

  • Philippines trade, Tuesday

  • Turkey industrial production, current account, Tuesday

  • EU finance ministers meet in Brussels, Tuesday

  • ECB Governing Council Member Robert Holzmann speaks, Tuesday

  • Eurozone, UK industrial production, Wednesday

  • India trade, Wednesday

  • South Korea jobless rate, Wednesday

  • ECB Governing Council member Yannis Stournaras speaks, Wednesday

  • Swedish Riksbank First Deputy Governor and Deputy Governor speak, Wednesday

  • Saudi Arabia, Spain CPI, Thursday

  • US PPI, retail sales, initial jobless claims, business inventories, Thursday

  • Australia Treasurer Jim Chalmers delivers pre-budget address, Thursday

  • Canada housing starts, Friday

  • China property prices, Friday

  • France, Italy, Poland CPI, Friday

  • Indonesia trade, Friday

  • Japan tertiary index, Friday

  • New Zealand PMI, Friday

  • Philippines overseas remittances, Friday

  • Sri Lanka GDP

  • US industrial production, University of Michigan consumer sentiment, Empire Manufacturing, Friday

  • Japan’s largest union federation announces results of annual wage negotiations, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures fell 0.2% as of 1:32 p.m. Tokyo time

  • Nikkei 225 futures (OSE) fell 3%

  • Japan’s Topix fell 2.9%

  • Australia’s S&P/ASX 200 fell 1.8%

  • Hong Kong’s Hang Seng rose 1.3%

  • The Shanghai Composite rose 0.2%

  • Euro Stoxx 50 futures fell 0.7%

  • Nasdaq 100 futures fell 0.4%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was unchanged at $1.0939

  • The Japanese yen was little changed at 147.02 per dollar

  • The offshore yuan was little changed at 7.1982 per dollar

  • The Australian dollar fell 0.2% to $0.6610

Cryptocurrencies

  • Bitcoin fell 1.1% to $68,636.63

  • Ether fell 1.2% to $3,860.24

Bonds

  • The yield on 10-year Treasuries declined one basis point to 4.07%

  • Japan’s 10-year yield advanced three basis points to 0.760%

  • Australia’s 10-year yield declined two basis points to 3.95%

Commodities

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu.

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