Yen Rises on BOJ Shift; S&P 500 Futures Drop: Markets Wrap

(Bloomberg) — The yen strengthened as the Bank of Japan announced it would further increase benchmark bond yields. The unexpected decision sent Japanese stocks and US and European stock futures down.

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BOJ raised the upper bound of the return target from 0.25% to 0.5%. The yield on 10-year Japanese government bonds rose 20.5 basis points to 0.455%, the highest since 2015.

The yen had appreciated since late October and was more recently boosted by speculation of a turn away from ultra-accommodative policies.

Asian equities entered a fourth day of declines amid news from Japan and broader investor concerns about the global inflation outlook. Reports of increasing disruptions due to Covid outbreaks continued to worry investors in Hong Kong and the mainland.

The S&P 500 closed Monday at its lowest level in more than a month. The benchmark was dragged down by declines at major technology companies, including Apple Inc., Microsoft Corp. and Amazon.com Inc.

A dollar gauge fell as the yen rose. US Treasury yields rose after the BOJ decision.

In China, banks maintained their benchmark lending rates, including the five-year rate that is a benchmark for mortgages, for a fourth month after the central bank left monetary policy unchanged last week.

Oil continued higher as investors weighed a commitment from China to fuel consumption against broader low-risk sentiment, with West Texas Intermediate above $75 a barrel.

William Dudley, former New York Fed president and Bloomberg Opinion columnist, underlined the poor global sentiment, telling Bloomberg Television on Monday that bullish markets can only tighten the central bank further.

Milford Asset Management sees the risk of corporate profit declines lingering as the economy slows. “We assume a profit drop of at least 20% and possibly a little more. That will come as a bit of a shock to investors next year,” said William Curtayne, portfolio manager, on Bloomberg Television.

Main events this week:

  • US housing starts, Tuesday

  • EIA Crude Oil Inventory Report, Wednesday

  • U.S. Existing Home Sales, Consumer Confidence in the U.S. Conference Board, Wednesday

  • US GDP, First Jobless Claims, US Conf. Board leading index, Thursday

  • US Consumer Income, New Home Sales, US Durable Goods, PCE Deflator, University of Michigan Consumer Confidence, Friday

Some of the major moves in the markets as of 7:30 am Tokyo time:

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  • S&P 500 futures fell 0.6% as of 12:40 a.m. in Tokyo. The S&P 500 closed 0.9% lower

  • Nasdaq 100 futures fell 0.7%. The Nasdaq 100 closed 1.4% lower

  • Japanese Topix fell 1.4%

  • The Australian S&P/ASX 200 fell 1.3%

  • Hong Kong’s Hang Seng fell 1.2%

  • The Shanghai Composite fell 0.6%

  • Euro Stoxx 50 futures fell 1%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.4%

  • The euro was little changed at $1.0616

  • The Japanese yen rose 2.4% to 133.56 per dollar

  • The offshore yuan changed little at 6.9809 to the dollar

  • The Australian dollar fell 0.2% to $0.6687

Cryptocurrencies

  • Bitcoin rose 0.6% to $16,691.06

  • Ether rose 1.2% to $1,190.11

Bonds

Raw materials

  • West Texas Intermediate crude rose 0.7% to $75.71 a barrel

  • Spot gold rose 0.4% to $1,794.60 an ounce

This story was created with the help of Bloomberg Automation.

–With help from Rheaa Rao and Jason Scott.

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