Yen weakens after BOJ tweak, China stocks fall: Markets wrap

The yen weakened after the Bank of Japan made only minor changes to its yield-curve-control settings, disappointing some in the market who had hoped for a further winding back of its accommodative monetary policy stance.

Japan’s currency slipped as much as 0.7% to 150.10 per dollar, while 10-year bond futures pared losses and stocks rose following the decision that also saw the central bank keeping its cap on long-term yields at 1% and leaving its negative interest rate untouched. The dollar gained.

The BOJ will take a more flexible approach to controlling yields on 10-year government debt, according to its statement. That marks a shift from a previous pledge to conduct daily bond buying operations at 1%, a stance that effectively drew a line in the sand at that level. The Nikkei had earlier reported the BOJ would consider letting yields climb above its 1% cap.

“Dollar-yen appears disappointed by the extent of the tweak though, especially after the Nikkei report,” said Carol Kong a strategist at Commonwealth Bank of Australia in Sydney. “The statement also continues to strike a dovish tone with the BOJ reiterating that it will patiently continue with monetary easing.”

Asian stocks were mostly lower after a gauge of China’s factory activity slid back into contraction in October. Hong Kong and mainland Chinese shares both dropped and the offshore yuan weakened.

The dollar strengthened versus all its Group-of-10 peers, extending gains immediately after the BOJ decision. Treasury yields dropped after the statement, before paring their decline. The US Treasury on Monday reduced its estimate for federal borrowing for the current quarter, citing stronger-than-expected revenue.

Australian bonds fell, pushing 10-year yields closer to 5%. The benchmark yield hasn’t breached that level since July 2011.

Oil edged higher in Asia after sliding Monday due to signs the Israel-Hamas war will remain contained while demand may be softening.

Foxconn Industrial Internet Co. rose in Shanghai after reporting a higher-than-expected profit margin as it made more AI server-related products. Bank of China Ltd. also gained following its third-quarter results.

Key events this week:

• Eurozone CPI, GDP, Tuesday
• US Conference Board consumer confidence, employment cost index, Tuesday
• China Caixin manufacturing PMI, Wednesday
• UK S&P Global / CIPS UK Manufacturing PMI, Wednesday
• US construction spending, ISM Manufacturing, job openings, light vehicle sales, Wednesday
• All Saints holiday in much of Europe, Wednesday
• Treasury quarterly refunding announcement, Wednesday
• Federal Reserve interest rate decision. Fed Chair Jerome Powell holds news conference, Wednesday
• Eurozone S&P Global Eurozone Manufacturing PMI, Thursday
• Bank of England interest rate decision. Governor Andrew Bailey holds news conference, Thursday
• US factory orders, initial jobless claims, productivity, Thursday
• Apple earnings, Thursday
• China Caixin services PMI, Friday
• Eurozone unemployment, Friday
• US unemployment, nonfarm payrolls, Friday
• Canada employment report, Friday

Here are some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.3% as of 12:56 p.m. Tokyo time. The S&P 500 rose 1.2%
• Nasdaq 100 futures fell 0.5%. The Nasdaq 100 rose 1.1%
• Japan’s Topix index rose 0.7%
• Hong Kong’s Hang Seng Index fell 1.7%
• China’s Shanghai Composite Index fell 0.4%
• Australia’s S&P/ASX 200 Index was little changed

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%
• The euro fell 0.2% to $1.0595
• The Japanese yen fell 0.6% to 149.94 per dollar
• The offshore yuan was little changed at 7.3261 per dollar
• The Australian dollar fell 0.4% to $0.6349

Cryptocurrencies

• Bitcoin fell 0.6% to $34,227.45
• Ether fell 0.4% to $1,795.11

Bonds

• The yield on 10-year Treasuries declined two basis points to 4.87%
• Japan’s 10-year yield advanced four basis points to 0.930%
• Australia’s 10-year yield advanced five basis points to 4.92%

Commodities

• West Texas Intermediate crude rose 0.3% to $82.59 a barrel
• Spot gold fell 0.2% to $1 992.76 an ounce

© 2023 Bloomberg