Asian shares extend global rout, benefiting on signs of yen intervention

Asian shares extend global rout, benefiting on signs of yen intervention
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An electronic stock quotation board is displayed inside a conference hall in Tokyo, Japan on November 1, 2021. REUTERS/Issei Kato

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  • Nikkei 2.3%, S&P 500 futures steady
  • The dollar fell 0.6% against the yen on news of a rate check from the BoJ
  • 2-year US yield scales to new 15-year high of 3.8040%
  • The US yield curve remains deeply inverted

SYDNEY, Sept 14 (Reuters) – Asian stocks fell on Wednesday as U.S. data dashed hopes of an immediate peak in inflation, while Japan halted its relentless run against the yen on strong signals it was unhappy with the currency’s sharp decline. .

Tuesday’s data showed the headline US consumer price index rose 0.1% on a monthly basis versus expectations for a 0.1% decline. In particular, core inflation, excluding volatile food and energy prices, doubled to 0.6%. Read more

Wall Street saw its biggest decline in two years, the safe-haven dollar posted its biggest jump in early 2020 and two-year Treasury yields, which have risen as traders expect higher Fed funds rates, hit their highest level in 15 years.

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The stock rout is set to hit European markets, with pan-region Euro Stoxx 50 futures, German DAX futures and FTSE futures off more than 0.7%.

In Asia, MSCI’s broadest index of Asia-Pacific shares excludes Japan (.MIAPJ0000PUS) Wednesday fell 2.2%, dragged down by a 2.4% plunge in asset-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) decreased by 2.6%.

Both S&P 500 futures and Nasdaq futures rose 0.2%, following a massive overnight equity selloff.

“Markets reacted violently to what I would consider a slight miss in US CPI,” said Scott Rundell, chief investment officer at Mutual Ltd.

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

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

A day ago, the chances of a 100 bps hike were nil.

“USD rates are now pricing in a 4.25% Fed funds rate for late 2022 (75bps, 75bps, 25bps for the remaining three meetings). A 4.5% top in early 2023 also reflects modest odds,” said senior Eugene Leo at Deutsche Bank Rates. strategist

“While resilient growth and subdued inflation may create a good risk-taking environment, the U.S. economy still looks very hot right now. With the labor market slowing and inflation still showing no clear signs of being problematic, a downshift from the Fed seems likely to be delayed again.”

The US dollar’s strength pressured the rate-sensitive Japanese yen near a 24-year low of 149.96 yen before giving up some gains on news that the Bank of Japan had checked rates in apparent preparations for currency intervention. Read more

Yen-buying interventions are rare. The last time Japan intervened to support its currency was in 1998, when the Asian financial crisis triggered a sell-off of the yen 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 is now trading at 143.7 yen, down 0.6% for the day.

Many traders remain skeptical that intervention is imminent, but the yen’s surge points to growing nerves. The timing of the BOJ’s move also suggests that 145 per dollar will be a critical level for markets and authorities.

The two-year US Treasury yield scaled a 15-year high of 3.8040% on Friday before retreating to 3.7629%, and its curve gap with the benchmark 10-year yield widened to nearly 34 basis points, up from just 16 basis points a week ago.

Yield curve investing is generally considered recession warning.

The yield on the 10-year Treasury note was steady at 3.4178%.

Oil prices fell on Friday. US crude fell 0.6% to $86.82 a barrel and Brent settled by the same margin at $92.65.

Gold prices were slightly higher. Spot gold traded at $1703.02 per ounce.

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Reporting by Stella Q; Editing by Stephen Coates, Anna Nicolasi da Costa and Sam Holmes

Our values: Thomson Reuters Trust Policy.

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