A gauge of Asian equities was slightly lower in choppy trading Friday as the malaise hanging over the global banking sector damped appetite for risk taking in markets. The yen rallied.
(Bloomberg) — A gauge of Asian equities was slightly lower in choppy trading Friday as the malaise hanging over the global banking sector damped appetite for risk taking in markets. The yen rallied.
Shares swung between gains and losses in Hong Kong, as did US futures, while contracts for Europe remained lower. Financials were among the worst-performing sector on MSCI Inc.’s Asia-wide index.
Despite the Nasdaq 100 pushing near to the threshold of a bull market Thursday, banking stocks missed out on the rally and a measure of US financial heavyweights sank to the lowest since November 2020. That tone carried over into Asia.
Treasury yields remained volatile and on course for a third day of declines while the dollar steadied after after weakening in the previous six sessions as investors positioned for the Federal Reserve to slash interest rates later this year. Short-dated Treasuries posted outsized moves for an 11th straight trading day Thursday and fluctuated Friday.
Traders remain wary of problems in the banking sector that have built up during the Fed’s rapid hiking cycle. The US lenders slumped even after Treasury Secretary Janet Yellen told lawmakers she was prepared for further steps to protect deposits if needed.
Government bond yields added to opening declines in Australia and New Zealand. Japan’s benchmark 10-year bond yield fell 1.5 basis points to 0.28%.
The yen rallied to the highest in six weeks on demand for haven assets over concerns of global banking sector’s health. A benchmark of nation’s inflation slowed for the first time in 13 months but gains in prices excluding fresh food and energy suggested stronger underlying inflationary pressures. This also supported the yen via market speculation that incoming BOJ Governor Kazuo Ueda may have to move toward policy normalization sooner rather than later.
“Japanese yen’s strong performance we believe is driven by the return of its safe haven appeal, especially given that we see that Japanese banks are in a relatively better standing,” said Alan Lau, a strategist at Malayan Banking Bhd in Singapore. “Overall, we are positive on the yen.”
Comments by Yellen about additional deposit actions, if warranted, offered investors comfort while they digested earlier rate hikes by the Bank of England, Norges Bank and Swiss National Bank, as well as hawkish comments by European Central Bank officials.
Even so, investors remain on guard to the risk of the economy going into reverse.
“We think that recession is a very likely prospect and that may very well turn the tables and see the Fed take a much more cautious approach, perhaps at the end of the year, opening the way for a rate cut,” Sue Trinh, co-head of global macro strategy Manulife Investment Management, said on Bloomberg Radio. “Of course, the risk to that is that it takes longer for those cuts to manifest.”
In the commodity space, oil declined and pared a weekly gain on concerns that the refilling of the US’s strategic crude inventories would take longer than previously expected. Gold was little changed.
Key events this week:
- Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
- US durable goods, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.1% as of 12:40 p.m. Tokyo time. The S&P 500 rose 0.3%
- Nasdaq 100 futures were little changed. The Nasdaq 100 rose 1.3%
- Euro Stoxx 50 futures fell 0.6%
- Japan’s Topix index was little changed
- Hong Kong’s Hang Seng Index was little changed
- China’s Shanghai Composite Index fell 0.5%
- Australia’s S&P/ASX 200 Index fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0827
- The Japanese yen rose 0.3% to 130.45 per dollar
- The offshore yuan fell 0.2% to 6.8440 per dollar
- The Australian dollar was little changed at $0.6683
Cryptocurrencies
- Bitcoin fell 0.3% to $28,237.86
- Ether fell 0.3% to $1,814.24
Bonds
- The yield on 10-year Treasuries declined three basis points to 3.39%
- Japan’s 10-year yield declined 1.5 basis points to 0.28%
- Australia’s 10-year yield declined seven basis points to 3.22%
Commodities
- West Texas Intermediate crude fell 0.2% to $69.80 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rob Verdonck, Hooyeon Kim and Matthew Burgess.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.