A passerby is reflected on an electric monitor displaying the graph of the recent moments of the Japanese yen exchange rate against the U.S. dollar in front of a brokerage firm in Tokyo, Japan, May 2, 2023. Portal/Issei Kato/File Photo Acquire License Rights
TOKYO, Oct 2 (Portal) – Asia’s stock markets started the fourth quarter cautiously in holiday trading on Monday, moving sideways, while the dollar held steady and a last-minute deal to avert a U.S. government shutdown lifted the S&P 500 futures soared.
Markets in India, Hong Kong and China were closed for a holiday.
Japan’s Nikkei (.N225) rose as much as 1.7% before falling back to zero in the afternoon. The yen fell to just under 150 per dollar and its weakness is a boon for exporters and the pricing of their overseas profits in yen.
A weekend deal to avoid a U.S. government shutdown also lifted sentiment, sending U.S. stock futures up 0.5% in Asia. The weekend’s emergency funding bill allowed the government to continue its work until November 17 and means the release of key data, including Friday’s monthly payroll report, can occur on time.
European futures rose 0.2%.
“Shutdown risks will only be delayed, not eliminated,” TD Securities strategists wrote in a note to clients.
“A sense of reduced uncertainty will likely lead to some easing in markets,” but “market volatility is likely to remain elevated as investors wait for the next catalyst, which is likely to be top-notch data.”
Japanese stocks also got a boost from the Bank of Japan’s quarterly Tankan survey, which showed improving business sentiment. MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) was flat.
DOLLAR RESILIENCE
Bond and currency trading continues to be driven by expectations of continued high U.S. interest rates, and Monday’s sale of Japanese bonds sparked a central bank response.
Benchmark 10-year Japanese government bond yields rose a basis point to their highest in a decade at 0.775%. The Bank of Japan said it would buy bonds with a maturity of 5 to 10 years on Wednesday. The extent of the purchases will then be announced. Futures rallied on this news.
In the Treasury market, 10-year Treasury yields rose 4 basis points to 4.6124% and two-year bond yields rose 3.7 basis points to 5.0832%.
The dollar remained steady in foreign exchange markets but fell short of last week’s milestone highs except for the yen, which hit its highest level since last October at 149.74 yen.
“The relative resilience of US growth and (a) hawkish stance from the Fed are factors that will continue to underpin support for the dollar until US data begins to show further clear signs of weakening,” said OCBC currency strategist Christopher Wong.
Mixed factory surveys in China and expectations of no change in interest rates at central bank meetings in the coming days continued to pressure the Australian and New Zealand dollars.
The Aussie fell 0.5% to $0.6400 and the Kiwi slipped 0.2% to $0.5986. The euro was slightly weaker at $1.0564.
Crude oil stabilized after declines at the end of the week
December Brent crude futures rose 16 cents, or 0.2%, to $92.36 a barrel. U.S. West Texas Intermediate crude futures rose 20 cents, or 0.1%, to $90.99 a barrel.
Reporting by Kevin Buckland. Additional reporting by Tom Westbrook in Singapore; Edited by Edwina Gibbs and Simon Cameron-Moore
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