(Bloomberg) — The yen rose after Bank of Japan Governor Kazuo Ueda signaled it’s still on the path to raise interest rates. Asian equities followed Wall Street lower, as traders wait on Federal Reserve Chair Jerome Powell’s Jackson Hole speech later Friday.
The Japanese currency rose 0.5%, while government bond futures fell. In replies to lawmakers, Ueda said the BOJ’s stance hadn’t changed, provided inflation and economic data continue in line with its forecasts. The comments come after his deputy had sought to reassure markets that further hikes would also depend on the state of the market, after the central bank’s increase in July trigger a massive selloff in global equities.
Ueda’s comments in parliament “put an end to speculation that the BOJ could back off from hiking again due to the market turmoil seen,” said Charu Chanana, head of currency strategy at Saxo Markets. “Keeping the door open for further rate hikes is positive for yen and negative for stocks at the margin.”
Earlier, Japanese inflation data exceeded forecasts. Consumer prices in July rose 2.8% from a year earlier, the same as the prior month and higher than the 2.7% expected by economists.
Equities in Hong Kong, Australia and South Korea declined, echoing Thursday’s selloff in US stocks where both the S&P 500 and tech-heavy Nasdaq 100 indexes retreated.
Meanwhile, the 10-year Treasury yield was steady after rising five basis points Thursday, when the policy-sensitive two-year yield climbed seven basis points, largely reversing the move from the prior session. An index of dollar strength slipped after a Thursday advance. Australian and New Zealand bond yields climbed.
Swaps traders pulled back marginally their expectations for US rate cuts this year, though still broadly priced in almost 100 basis points of cuts through December.
“We are now once again not debating if they will cut, but by how much they will cut and how many times they will cut before year end,” said Kenny Polcari at SlateStone Wealth. “The US economy is not circling the drain – so there is no need to suggest that it is.”
The focus is now on Powell’s address later Friday at the annual Jackson Hole symposium in Wyoming.
Investors waded through a raft of remarks from US policymakers, with Fed Bank of Kansas City President Jeffrey Schmid saying he wants to see more data before supporting cuts. His Boston counterpart Susan Collins said “a gradual, methodical pace” is likely to be appropriate. Her comments were echoed by Philadelphia Fed President Patrick Harker in a CNBC interview.
“The script is clear — the Fed is going to ease in September, but no one is portraying a desire to ease 50 basis points at this time,” said Andrew Brenner at NatAlliance Securities.
On the economic front, the latest figures were mixed. Jobless claims data showed the labor market is cooling only gradually — rather than rapidly slowing amid elevated rates. US manufacturing activity shrank at the fastest pace this year. And existing-home sales increased for the first time in five months.
Big Tech dropped in the US on Thursday, with Nvidia Corp. down 3.7% and Intel Corp. tumbling 6.1%, while banks and energy shares rose. Peloton Interactive Inc. surged 35% after the fitness company reported earnings that beat estimates.
In commodities, oil headed for a weekly loss — after hitting the lowest close since January midweek — on a challenging demand outlook, sinking product prices, and US efforts to secure a cease-fire in Gaza.
Key events this week:
- US new home sales, Friday
- Jerome Powell speaks in Jackson Hole, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.2% as of 11:33 a.m. Tokyo time
- Japan’s Topix fell 0.1%
- Australia’s S&P/ASX 200 fell 0.3%
- Hong Kong’s Hang Seng fell 0.8%
- The Shanghai Composite fell 0.3%
- Euro Stoxx 50 futures fell 0.2%
- Nasdaq 100 futures rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.1% to $1.1124
- The Japanese yen rose 0.5% to 145.59 per dollar
- The offshore yuan was little changed at 7.1429 per dollar
- The Australian dollar was little changed at $0.6710
Cryptocurrencies
- Bitcoin was little changed at $60,723.25
- Ether rose 0.5% to $2,639.49
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.84%
- Japan’s 10-year yield advanced two basis points to 0.890%
- Australia’s 10-year yield advanced three basis points to 3.92%
Commodities
- West Texas Intermediate crude fell 0.2% to $72.84 a barrel
- Spot gold rose 0.1% to $2,487.66 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu.
(An earlier version was corrected to show that markets expect about 100 basis points of cuts by the Fed this year)
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