A passerby is reflected on an electric screen displaying a last-minute chart of the Japanese yen/US dollar exchange rate outside a brokerage firm in Tokyo, Japan on May 2, 2023. REUTERS PHOTO/ISEI KATO/File Obtaining licensing rights
TOKYO (Reuters) – Asian stock markets got off to a tentative start to the fourth quarter of the year in holiday-thin trading on Monday, with S&P 500 futures rising while the dollar held firm and a last-minute deal to avoid a U.S. government shutdown took hold. .
Markets in India, Hong Kong and China were closed for holiday.
Japan’s Nikkei (.N225) jumped as much as 1.7%, before falling to a flat level in the mid-afternoon. The yen has fallen to nearly $150 per dollar, and its weakness is a boon for exporters pricing their foreign earnings in yen.
An 11th-hour agreement to avoid a US government shutdown, reached over the weekend, also helped improve the mood and lift US stock futures by 0.5% in Asia. A temporary funding bill released at the weekend allowed the government to continue working until November 17, and means key data releases including Friday’s monthly payrolls report can go ahead on time.
European futures rose 0.2%.
“Lockdown risks are only delayed, not eliminated,” strategists at TD Securities wrote in a client note.
“The feeling of reduced uncertainty is likely to bring some relief to markets,” but “market volatility is likely to remain high as investors wait for the next catalyst, which is likely to be top-tier data.”
Japanese stocks also received support from the Bank of Japan’s quarterly Tankan survey, which showed an improvement in business sentiment. MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was flat.
Flexibility of the dollar
Bond and forex trading remains driven by expectations that US interest rates will remain high, and the selling of Japanese bonds on Monday prompted a central bank response.
Japanese 10-year government bond yields rose by a basis point to a decade high of 0.775%. The Bank of Japan said that it will buy 5-10-year bonds until their maturity on Wednesday, with the size of the purchases to be announced then. Futures bounced on the news.
In the Treasury market, the 10-year Treasury yield rose 4 basis points to 4.6124%, and the 2-year yield rose 3.7 basis points to 5.0832%.
The dollar remained high in currency markets, despite stopping from its highest levels recorded last week, with the exception of the yen, which recorded its highest level since last October at 149.74 yen.
“Relative growth resilience in the US and a hawkish Fed are factors that continue to support the dollar, until US data begins to show more material signs of a decline,” said Christopher Wong, currency strategist at OCBC.
Mixed Chinese factory surveys and the expectation of no changes to interest rate settings at central bank meetings in the coming days put pressure on the Australian and New Zealand dollars.
The Australian dollar fell 0.5% to 0.6400 US dollars, and the New Zealand dollar fell 0.2% to 0.5986 US dollars. The euro fell slightly to $1.0564.
Crude oil prices stabilized after late-week declines
Brent crude futures for December rose 16 cents, or 0.2 percent, to $92.36 a barrel. US West Texas Intermediate crude futures gained 20 cents, or 0.1%, to $90.99 per barrel.
Kevin Buckland reports. Additional reporting by Tom Westbrook in Singapore. Edited by Edwina Gibbs and Simon Cameron-Moore
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