Asian shares extend global rout, yen rises on intervention hints

Asian shares extend global rout, yen rises on intervention hints
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An electronic stock quote board is displayed at a conference hall in Tokyo, Japan on November 1, 2021. REUTERS/Issei Kato

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  • Nikkei lost 2.3%, S&P 500 futures were flat
  • The dollar fell 0.6% against the yen on news of a rate hike from the BoJ
  • The 2-year US yielded a 15-year high of 3.8040%
  • The US yield curve remains deeply inverted

SYDNEY, Sept 14 (Reuters) – Asian shares fell on Wednesday as U.S. data dashed hopes of an immediate peak in inflation, although Japan halted the dollar’s slide against the yen as it gave its strongest signal yet, unhappy with the currency’s sharp decline. .

Data on Tuesday showed that the US consumer price index rose 0.1% month-on-month, against expectations for a 0.1% decline. In particular, core inflation, which strips out volatile food and energy prices, doubled to 0.6%. read more

Wall Street saw its steepest decline in two years, the safe-haven dollar posted its biggest jump since early 2020 and two-year Treasury yields rose to their highest level in 15 years, buoyed by traders’ expectations of higher Fed funds rates. .

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The stock market is set to hit European markets, with the overall regional Euro Stoxx 50 futures, German DAX futures and FTSE futures down more than 0.7%.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) It fell 2.2% on Wednesday, dragged down by a 2.4% drop in resource-heavy Australia (.AXJO)Hong Kong’s Hang Seng index fell 2.5% (.HSI) and a 1.5% decline in Chinese bluechips (.CSI300).

Japan’s Nikkei (.N225) It decreased by 2.6%.

Both the S&P 500 futures and Nasdaq futures rose 0.2% after a heavy sell-off in stocks overnight.

“Markets have reacted violently to what I would consider a modest error in the US CPI,” said Scott Rundell, chief investment officer at Mutual Limited.

“Futures have stabilized, so we could see a dead cat bounce tonight.”

Financial markets have now fully priced in at least a 75 basis point rate hike at the conclusion of next week’s Fed policy meeting, with a 38% chance of a super-sized, full percentage point hike to the Fed funds target. Ratio according to CME’s FedWatch tool.

A day ago, the probability of a 100 bps increase was nil.

“Dollar rates now peg the Fed funds rate at 4.25% through the end of 2022 (75bps, 75bps, 25bps for the remaining three meetings). There are also decent odds for a 4.5% peak in early 2023.” , – said senior specialist Eugene Leow. Rates Strategist at Deutsche Bank.

“While steady growth and slowing inflation may create a better risk-taking environment, the U.S. economy still looks very hot right now. With the labor market slowing and no clear signs that inflation is still problematic, it looks like Fed tapering will be delayed again.” .”

U.S. dollar strength pressured the price-sensitive Japanese yen near a 24-year low of 149.96 yen before giving up some gains on news that the Bank of Japan is conducting exchange rate checks in apparent preparation for currency intervention. read more

Yen buying intervention is rare. The last time Japan intervened to support its currency was in 1998, when the Asian financial crisis led to yen selling and rapid capital outflows.

Earlier in the day, Japanese Finance Minister Shunichi Suzuki said currency intervention was among the options the government would consider. read more

The dollar fell by 0.6% during the day and remained at 143.7 yen.

Many traders were skeptical that intervention was imminent, but the bounce in the yen signaled growing nerves. The timing of the BOJ’s move also suggests that 145 to the dollar will be an important level for markets and authorities.

The two-year U.S. Treasury yield hit a fresh 15-year high of 3.8040% on Friday before retreating to 3.7629%, and its curve gap with the 10-year yield widened to nearly 34 basis points, compared with just 16 basis points. A week ago

A yield curve inversion is usually viewed as a recession warning.

The yield on 10-year Treasury notes remained steady at 3.4178%.

Oil prices fell on Friday. US crude oil fell by 0.6% to $86.82/barrel, while Brent fell by a similar margin to $92.65.

Gold was slightly higher. An ounce of spot gold was sold at $1,703.02.

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Reporting by Stella Qiu; Edited by Stephen Coates, Ana Nicolaci da Costa and Sam Holmes

Our standards: Thomson Reuters Trust Principles.

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