Asian Equities Struggle as Yen Strengthens on BOJ Governor’s Remarks

Introduction

Asian equities may struggle to find traction on Monday as cautious trading begins around the region. In currency markets, the yen is on the front foot following potentially hawkish remarks by the Bank of Japan (BOJ) governor.

Stocks and Currency Markets

• Futures for Australia were fractionally higher
• A gauge of US-listed Chinese stocks fell
• Contracts for Japan showed a small gain
• The yen strengthened back below 147 versus the dollar
• The dollar edged lower against other Group-of-10 counterparts
• The Bloomberg Dollar Spot Index notched its eighth straight up week

Federal Reserve and US Monetary Policy

The recent rally of the dollar has driven the currency to a record streak of weekly gains. This has been bolstered by bets that the Federal Reserve will keep interest rates higher for longer as the US defies a global economic gloom. Fed Bank of New York President John Williams said US monetary policy is “in a good place,” but officials will need to analyze data to decide on how to proceed with interest rates.

US Stock Futures

US stock futures were little changed early Monday after small moves at the end of the week. The S&P 500 edged higher after a three-day drop. Nvidia Corp. and Tesla Inc. weighed on the megacap space, while Apple Inc. bounced back after a rout that erased $190 billion in value.

Bank of America’s Outlook

Bank of America Corp. strategists led by Michael Hartnett predict that the rising threat of interest rates staying higher for longer is likely to dent prospects of a soft landing for the US economy and drive a selloff in stocks over the next two months. They believe the consensus probability of a hard landing is around 20%, but oil, dollar, and bond yields remaining elevated, as well as tighter financial conditions, pose risks in September and October.

Key Events this Week

• UK jobless claims, unemployment, on Tuesday
• Eurozone industrial production on Wednesday
• UK industrial production on Wednesday
• US CPI on Wednesday
• Eurozone ECB rate decision on Thursday
• Japan industrial production on Thursday
• US retail sales, PPI, business inventories, initial jobless claims on Thursday
• China property prices, retail sales, industrial production on Friday
• US industrial production, University of Michigan consumer sentiment, Empire Manufacturing index on Friday

Market Movements

Stocks:

• S&P 500 futures were little changed
• Nasdaq 100 futures rose 0.1%
• Nikkei 225 futures rose 0.3%
• Australia’s S&P/ASX 200 Index rose 0.1%

Currencies:

• The euro was little changed at $1.0710
• The Japanese yen rose 0.4% to 147.22 per dollar
• The offshore yuan was little changed at 7.3614 per dollar
• The Australian dollar rose 0.2% to $0.6391

Cryptocurrencies:

• Bitcoin rose 0.4% to $25,920.92
• Ether rose 0.3% to $1,623.3

Bonds:

Commodities

This story was produced with the assistance of Bloomberg Automation.

Conclusion

Asian equities face a challenging start to the week as the yen strengthens on potentially hawkish remarks by the BOJ governor. Meanwhile, the Federal Reserve’s monetary policy and rising interest rates pose risks to the US economy and stock markets. Investors will closely watch key events this week, including economic data releases and central bank decisions.

Disclaimer: This article contains information from Bloomberg and is for informational purposes only.