Asian Stocks Fluctuate as Yen Extends Rally
Asian shares traded sideways early Friday, as investors juggled a stronger yen and the latest US data that sustained expectations for the Federal Reserve to begin policy easing next week.
Equity benchmarks in Japan, an export-oriented economy, declined after the yen extended its recent strength to trade around 141 per dollar. Australian stocks rose while those in South Korea were flat, following a fourth day of gains on Wall Street. Hong Kong futures were higher.
The range-bound trading suggests caution ahead of next week's Fed policy meeting, after data showed Thursday that US producer price index picked up slightly in August after the previous month's numbers were revised lower. Meanwhile, categories that feed into the Fed's preferred inflation gauge were muted.
The latest figures did little to alter expectations that the Fed will trim rates when its monetary policy committee meets next week, but for some it kept alive the idea the first cut may be 50 basis points.
The dollar dropped, with 10-year Treasury yields shedding three basis points in early Asian trading.
"We think PPI sustains a lingering possibility of a starter 50, which would take less risk with the soft landing," said Krishna Guha at Evercore.
Thursday's wholesale inflation data followed the more closely watched consumer price index, which showed underlying inflation accelerated in August. Yet policymakers have made it clear that they're currently highly focused on softness in the labor market, which is more likely to drive policy discussions in the months ahead.
"With PPI basically repeating yesterday's CPI reading and jobless claims in line with expectations, the decks have been cleared for the Fed to kick off a rate-cutting cycle," said Chris Larkin at E*Trade from Morgan Stanley. "The markets are anticipating an initial 25 basis-point cut, but the discussion will soon turn to how far and fast the Fed is likely to trim rates over time.
BOJ Hike
In Japan, just over half of central bank watchers see authorities conducting their next rate hike in December, while none expects a policy move when the board meets next week, according to a Bloomberg survey.
In the past four weeks, five of nine board members have telegraphed their intention to raise rates again if the bank's inflation outlook is realized. Market volatility in the days after the Bank of Japan's July 31 rate hike hasn't spooked policymakers enough to derail them from the normalization path.
"Chances are extremely low for a rate hike at this meeting," Masamichi Adachi, chief Japan economist at UBS Securities, said. "It's too early to discern the impact of the July rate hike and market rout."
In Asia, data set for release includes Japan industrial production, trade balance figures for India and gross domestic product for Sri Lanka.
West Texas Intermediate, the US oil price, edged higher after rising more than 2% Thursday as storm Francine disrupted production in the Gulf of Mexico. Gold was little changed after touching an all-time high in the prior session.
In the battle against inflation, central banks used to be the lone hero. But missteps in managing the post-pandemic price surge, and rising risks as war, tariffs and climate shocks cause supply shortages, mean that in the future the fight may be more of a team sport. Key events this week:
Eurozone industrial production, Friday
Japan industrial production, Friday
Michigan consumer sentiment, FridaySome of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 8:15 a.m. Tokyo time
Hang Seng futures rose 0.2%
S&P/ASX 200 futures rose 0.6%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.1076
The Japanese yen rose 0.1% to 141.64 per dollar
The offshore yuan was little changed at 7.1185 per dollar
The Australian dollar was little changed at $0.6725
Commodities
West Texas Intermediate crude rose 0.5% to $69.30 a barrel
Spot gold was little changed
Source: Bloomberg
