Asian stock markets showed varied performance on Thursday as investors navigated the aftermath of a tumultuous week marked by central bank policy shifts. Japan’s Topix Index experienced a further decline, despite a previous rebound from an early 1.8% drop. In contrast, benchmarks in China and Hong Kong posted gains, while those in Korea and Australia fell. MSCI’s Asia-Pacific Index decreased slightly, down 1.9% for the week. The dollar weakened against major currencies, including the yen.
Following last week’s Bank of Japan meeting, a summary revealed divergent views among policymakers. One member suggested a neutral rate of 1%, while another advocated for timely rate adjustments to prevent sudden hikes.
Global markets have been unsettled as investors anticipate divergent moves from the US and Japanese central banks, complicating the yen’s role as a funding source for financial assets.
Kerry Goh, Chief Investment Officer at Kamet Capital Partners Pte, remarked, “We are in a consolidation phase before any new trend emerges due to recent market volatility. Investors may remain cautious until new data is available. The coming days will be critical for either a return to stability or an increase in volatility.”
The Nikkei 225 and Topix have recovered approximately half of their losses since late July, when the Bank of Japan raised its key rate. Japan’s 10-year benchmark yield fell for the second consecutive day.
According to JPMorgan Chase & Co. strategists, three-quarters of the carry trade has been reversed, erasing positive returns for the year. This trading strategy, which involves borrowing at low rates to invest in higher-yielding assets, has struggled amid recent global market volatility and unexpected rate hikes by the Bank of Japan.
Quincy Krosby of LPL Financial noted that the unwinding of the carry trade may continue, but the decreasing pace offers some relief to investors. “A weaker dollar, driven by expectations of an impending Fed easing cycle, could support a stronger yen, negatively impacting the carry trade.”
Investors are awaiting US jobless claims data due Thursday for further insights. Recent weak economic data has intensified concerns about a potential slowdown, complicating the Federal Reserve’s decision to maintain rates at a two-decade high.
The dollar was weaker on Thursday, reversing previous gains. Weak demand for a 10-year Treasury auction and $31.8 billion in debt offerings from major companies added to market pressures.
Zachary Griffiths, Head of US Investment Grade and Macro Strategy at CreditSights, commented, “The recent correction in yields seems overdone, given the moderately weak payrolls report.”
In individual stock movements, Lasertec shares surged by up to 23%, the largest increase since January 2015, following strong fourth-quarter results from record orders.
Oil prices stabilized after a significant rise over the past week, with markets concerned about potential retaliatory actions by Iran against Israel in response to recent assassinations of Hamas and Hezbollah leaders.
Key Events This Week:
1.Germany industrial production, Thursday
2.US initial jobless claims, Thursday
3.Fed’s Thomas Barkin speaks, Thursday
4.China PPI, CPI, Friday
Market Summary:
Stocks:
1.S&P 500 futures: little changed
2.Nikkei 225 futures: -0.3%
3.Japan’s Topix: -0.4%
4.Australia’s S&P/ASX 200: -0.3%
5.Hong Kong’s Hang Seng: +0.7%
6.Shanghai Composite: +0.4%
7.Euro Stoxx 50 futures: -0.9%
8.Nasdaq 100 futures: +0.2%
Currencies:
1.Bloomberg Dollar Spot Index: -0.2%
2.Euro: +0.1% to $1.0936
3.Japanese yen: +0.3% to 146.21 per dollar
4.Offshore yuan: +0.3% to 7.1656 per dollar
5.Australian dollar: +0.6% to $0.6559
Cryptocurrencies:
1.Bitcoin: +3.4% to $57,031.84
2.Ether: +3.6% to $2,435.25
Bonds:
1.10-year Treasuries yield: -3 basis points to 3.91%
2.Japan’s 10-year yield: -2 basis points to 0.855%
3.Australia’s 10-year yield: little changed at 4.08%
Commodities:
1.West Texas Intermediate crude: +0.1% to $75.31 a barrel
2.Spot gold: +0.5% to $2,393.81 an ounce
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