(Bloomberg) — Japanese stocks fell and the yen rose as investors positioned for a potential interest rate hike from the country’s central bank, the highlight of an eventful day in Asia.
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The Nikkei 225 index fell as much as 1.5%, while Japan’s 10-year yield rose six basis points to 1.055%, with just hours left before the Bank of Japan’s decision. Public broadcaster NHK reported that board members BOJ officials will discuss raising interest rates to around 0.25% on Wednesday from the current range of 0 to 0.1%.
“Given the close relationship between the yen and the Nikkei, not to mention the enormous influence Japan has over global financial flows, today’s meeting could be a source of significant volatility,” said Kyle Rodda, senior market analyst at Capital.Com.
With the BOJ’s decision firmly in focus, financial markets across the region saw big moves following key earnings and local economic data that are crucial in shaping monetary policy trajectories. Investors also braced for the Federal Reserve’s decision, expected on Wednesday, with expectations that Chairman Jerome Powell could signal a possible rate cut in September.
South Korea’s Kospi rose, boosted by earnings from Samsung Electronics Co. after the chipmaker reported the fastest pace of profit growth since 2010. Stocks in mainland China and Hong Kong opened higher even as data showing that China’s factory activity contracted for the third consecutive month in July.
The Australian dollar fell and short-term bonds rallied after underlying inflation unexpectedly slowed last quarter, prompting investors to increase bets on a Central Bank interest rate cut.
Treasury yields stabilized after falling in the previous four sessions. A Bloomberg gauge of dollar strength fell.
Goldman Sachs Group Inc. chief David Solomon told CNBC that one or two Fed rate cuts later this year look increasingly likely. This after predicting just two months ago that there would be no reductions in 2024.
“If the Fed doesn’t signal a rate cut in September, markets could look a little ugly given recent technology weakness — especially if earnings are lower than expected,” said Tom Essaye of The Sevens Report.
Elsewhere, oil rose for the first time in four sessions after an industry report pointed to a fifth week of draws in U.S. crude inventories.
Overnight in the US, the world’s largest technology companies extended their losses in the last few hours, as Microsoft Corp.’s results rose. fueled concerns that the artificial intelligence frenzy might have gone too far. The rotation of big technology companies has dragged the Nasdaq 100 down 9% from its all-time high – leaving it on the brink of a correction.
The S&P 500 fell to around 5,435 on Tuesday. The Nasdaq 100 fell 1.4%. An indicator of the “Magnificent Seven” megacaps fell 2%. The Russell 2000 of small companies rose 0.3%. Nvidia Corp. fell 7%, wiping $193 billion off its market value.
If the Fed is about to begin a rate-cutting cycle, stock bulls have history on their side. In the previous six bull cycles, the S&P 500 rose an average of 5% a year after the first cut, according to calculations by financial research firm CFRA. What’s more, gains have also broadened, with the small-cap Russell 2000 index up 3.2% 12 months later, the data shows.
Main events this week:
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Eurozone CPI, Wednesday
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Bank of Japan policy decision Wednesday
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US ADP Job Change Wednesday
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Fed Rate Decision Wednesday
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Meta Platforms Earnings Wednesday
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Eurozone S&P Global Eurozone Manufacturing PMI, Unemployment, Thursday
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U.S. Initial Jobless Claims, ISM Manufacturing, Thursday
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Amazon, Apple Earnings, Thursday
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Bank of England Rate Decision Thursday
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US employment, factory orders, Friday
Some of the main movements in the markets:
Actions
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S&P 500 futures were up 0.2% at 10:51 a.m. Tokyo time
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Nikkei 225 (OSE) futures fell 0.7%
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Japan’s Topix fell 0.2%
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Australia’s S&P/ASX 200 rose 1.2%
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Hong Kong’s Hang Seng rose 0.7%
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The Shanghai Composite rose 0.5%
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Euro Stoxx 50 futures were little changed
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Nasdaq 100 futures rose 0.7%
Coins
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The Bloomberg Dollar Spot Index fell 0.1%
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The euro was little changed at $1.0823
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The Japanese yen rose 0.2% to 152.44 per dollar
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The offshore yuan rose 0.1% to 7.2361 per dollar
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The Australian dollar fell 0.6% to $0.6501
Cryptocurrencies
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Bitcoin little changed at $66,235.54
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Ether fell 0.1% to $3,276.76
Titles
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The 10-year Treasury yield was little changed at 4.14%
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Japan’s 10-year yield rose six basis points to 1.055%
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Australia’s 10-year yield fell 16 basis points to 4.12%
goods
This story was produced with help from Bloomberg Automation.
–With assistance from Rita Nazareth.
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