Asian shares fall after central bank’s brutal week, yen in headlines

A passerby walks past an electric monitor displaying stock price indices of different countries outside a bank in Tokyo

A passerby walks past an electric monitor displaying stock price indices of different countries outside a bank in Tokyo, Japan on March 22, 2023. Reuters/Issei Kato/File Photo Get licensing rights

SYDNEY, Sept 25 (Reuters) – Asian shares fell on Monday under pressure from China, after central banks reinforced last week’s message that interest rates will remain high for longer, while investors looked to inflation fears from the United States and Europe. Awaited the figures.

Markets will be looking for clues on whether China’s economy is getting back on track, with a week-long national holiday set to begin on Friday that will be a key test for consumer spending.

The yen teetered near levels seen near 150 per dollar amid fears of intervention after the Bank of Japan made no changes to its accommodative monetary policy. Governor Kazuo Ueda is scheduled to deliver a speech and answer questions at 14:30 local time.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 0.6%, having hit near a ten-month low just last week. On the other hand, Japan’s Nikkei (.N225) rose 0.7%.

Chinese bluechips (.CSI300) fell 0.5% after rising 1.8% on Friday, while Hong Kong’s Hang Seng Index (.HSI) fell 1.1%, giving back almost half of Friday’s gains.

S&P on Monday cut its forecast for China’s economic growth in 2023 to 4.8% from 5.2%, saying fiscal and monetary easing remained limited.

“Policymakers’ emphasis on leverage and financial risk appetite has raised the bar for macro stimulus,” said Luis Kuiz, chief economist for Asia-Pacific.

The big tests in the coming week will be industrial profit data from China on Wednesday, as well as manufacturing and services PMIs on Saturday.

bond route

Bond investors were still wary of the US Federal Reserve’s more dovish rate projections, which took the market by surprise. With the recent economic resilience in the US economy, markets bet that interest rates will remain high for a longer period of time and expectations for a rate cut have fallen sharply.

“Underlying the move this year is recognition that the inflation shock is not temporary, but will require restrictive monetary policy for much longer than we thought,” said Andrew Lilley, chief rates strategist at Barrenjoy.

“To get bullish on bonds globally, we would need a coordinated rate cut cycle, especially from the Fed. Personally I don’t think the Fed will cut in 2024, so I don’t think 2024 will be a particularly It will be a good year for bonds too.”

Ten-year Treasury yields rose 2 basis points to 4.4580% on Monday, after retreating from a 16-year high of 4.508% on Friday.

Two-year yields were little changed at 5.1162%, falling from a 17-year high of 5.2020% hit last week.

A lot will depend on US data. In a sign of slowing growth, U.S. business activity remained basically flat in September, with the vast services sector essentially idle at its slowest pace since February.

JPMorgan chief economist Bruce Kassman expects good news from US and European inflation results this week, which should show lower core inflation readings.

The Fed’s favorite inflation gauge, the core personal consumption expenditures price index, is expected on Thursday to show a 0.2% monthly increase for August, unchanged from July. Other US data for the week include final Q2 GDP, and weekly jobless claims.

Euro zone inflation data for September is due on Friday.

In currency markets, the US dollar remained near its six-month high of 105.60 against a basket of major currencies.

The yen last traded at 148.41 per dollar after hitting a 10-month low of 148.49 earlier in the day.

Oil prices were modestly higher, not far off their 10-month high. Brent crude futures rose 0.2% to $93.39 a barrel. US West Texas Intermediate crude futures were also up 0.1% at $90.16.

Gold was down 0.1% at $1,923.07 an ounce.

Reporting by Stella Qiu; Editing by Sonali Paul and Himani Sarkar

Our Standards: The Thomson Reuters Trust Principles.

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