(Bloomberg) — A rally in Japanese shares lost momentum after the yen resumed its rise, threatening a nascent global equities recovery driven by signs of resilience in the US labor market.
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The Topix index narrowed its gain to 0.6% from as much as 2% earlier, after the Japanese currency erased losses to strengthen against the dollar. A stronger yen puts a damper on the country’s stocks as it erodes Japan’s export competitiveness.
Elsewhere in Asia, stocks maintained their gains from Australia to South Korea and Hong Kong, tracking a strong showing on Wall Street. Chinese shares turned flat after an earlier advance as perceptions grew that a better-than-expected inflation print mainly resulted from seasonal factors like weather.
The Euro Stoxx 50 futures edged higher, while US contracts were flat. The dollar slid. Treasury yields dropped after a three-day increase.
A resurgent yen threatens a full recovery of risk appetite after the recent global meltdown. It came just as a better US jobless claims report helped alleviate fears of a recession triggered by last week’s worse-than-expected employment data. The focus will now shift toward a fresh slew of US economic indicators due next week, including consumer prices.
Different signals from US central bank officials also may prompt caution among investors. For one, Federal Reserve Bank of Kansas City President Jeffrey Schmid indicated he’s not ready to support a reduction in interest rates with inflation above the target, according to comments made on Thursday in the US.
Swap traders further trimmed bets on aggressive Fed easing in 2024. The global repricing has been so sharp that at one point interest-rate swaps implied a 60% chance of an emergency rate cut by the Fed in the coming week — well before its next scheduled meeting in September. Current pricing suggests about 40 basis points of cuts for September.
The yen’s latest gains came after BNY said unwinding of yen-funded carry trades has further room to run and that the Japanese currency may strengthen toward 100 per dollar over time. Meantime, JPMorgan Chase & Co. strategists joined their peers at UBS Group AG in lowering year-end targets for Japan’s key stock gauges because of the stronger yen.
Oil was steady following a Thursday rally, against the backdrop of simmering tensions in the Middle East. Gold slid.
Meanwhile, steel and aluminum producers in Canada were urging Prime Minister Justin Trudeau’s government to swiftly impose new tariffs on Chinese products, saying metals from the Asian powerhouse are flooding the Canadian market and threatening local jobs.
Key events this week:
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.2% as of 2:11 p.m. Tokyo time
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Nasdaq 100 futures fell 0.3%
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Japan’s Topix was little changed
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Australia’s S&P/ASX 200 rose 1%
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Hong Kong’s Hang Seng rose 1.4%
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The Shanghai Composite was little changed
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Euro Stoxx 50 futures were little changed
Currencies
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The Bloomberg Dollar Spot Index fell 0.2%
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The euro was little changed at $1.0921
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The Japanese yen rose 0.3% to 146.86 per dollar
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The offshore yuan rose 0.2% to 7.1688 per dollar
Cryptocurrencies
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Bitcoin rose 2.3% to $60,881.85
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Ether rose 3.7% to $2,665.34
Bonds
Commodities
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West Texas Intermediate crude was little changed
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Spot gold fell 0.2% to $2,422.73 an ounce
This story was produced with the assistance of Bloomberg Automation.
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