Asian shares extend global rout, yen perks up on intervention hints

An electronic stock quotation board is displayed in a conference room in Tokyo, Japan November 1, 2021. REUTERS/Issei Kato

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  • Nikkei falls 2.3%, S&P 500 futures stabilize
  • The dollar falls 0.6% against the yen following the announcement of a rate control by the BoJ
  • US 2-year yields hit new 15-year high at 3.8040%
  • The US yield curve remains deeply inverted

SYDNEY, Sept 14 (Reuters) – Asian stocks fell on Wednesday as U.S. data dashed hopes of an immediate spike in inflation, although the dollar halted its relentless run against the yen as Japan gave his strongest signal, but he was unhappy with the sharp drop in the currency. .

Tuesday’s data showed that the headline US consumer price index gained 0.1% on a monthly basis against expectations of a 0.1% decline. In particular, core inflation, excluding food and energy price volatility, doubled to 0.6%. Read more

Wall Street suffered its biggest fall in two years, the safe-haven dollar posted its biggest jump since the start of 2020 and two-year Treasury yields, which rise on traders’ expectations of higher interest rates. federal funds, hit their highest level in 15 years.

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The equity rout is set to hit European markets, with pan-regional Euro Stoxx 50 futures, German DAX futures and FTSE futures down more than 0.7%.

In Asia, the broadest MSCI index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) fell 2.2% on Wednesday, led by a 2.4% plunge in resource-rich Australia (.AXJO)a 2.5% drop in the Hong Kong Hang Seng index (.HSI) and a 1.5% decline in Chinese bluechips (.CSI300).

Japan’s Nikkei (.N225) fell 2.6%.

After a strong sell-off in stocks overnight, S&P 500 and Nasdaq futures rose 0.2%.

“Markets reacted violently to what I would consider a modest misfire in the US CPI,” said Scott Rundell, chief investment officer at Mutual Limited.

“Futures have stabilized, so we could see a dead cat bounce tonight.”

Financial markets have now fully priced in an interest rate hike of at least 75 basis points by the end of the Fed’s monetary policy meeting next week, with a 38% chance of a very large hike. large size, in percentage points, of the federal funds target. rate, according to CME’s FedWatch tool.

A day earlier, the probability of a 100 basis point hike was nil.

“USD rates now price in a fed funds rate of 4.25% by the end of 2022 (75 bps, 75 bps, 25 bps for the remaining three meetings). Decent odds of a 4.5% spike in early 2023 are also reflected,” said Eugene Leow, senior rates strategist at Deutsche Bank.

“While resilient growth and slowing inflation may create a better environment for risk-taking, the U.S. economy still looks too hot. With no clear signs of a labor market slowdown and inflation still problematic, a Fed slowdown should be delayed again.”

US dollar strength had pushed the rate-sensitive Japanese yen close to a 24-year low at 149.96 yen before giving up some of the gains after learning that the Bank of Japan had conducted a rate check. in apparent preparation for monetary intervention. Read more

Interventions to buy yen are rare. The last time Japan stepped in to support its currency was in 1998, when the Asian financial crisis triggered a massive yen sell-off and rapid capital outflows.

Earlier today, Japanese Finance Minister Shunichi Suzuki said monetary intervention was among the options the government would consider. Read more

The dollar was now hovering at 143.7 yen, down 0.6% for the day.

Many traders were still doubtful an intervention was imminent, but the yen’s jump signaled mounting nerves. The timing of the BOJ’s decision also suggests that 145 to the dollar will be an important level for markets and authorities.

The two-year U.S. Treasury yield hit a new 15-year high of 3.8040% on Friday before falling to 3.7629%, and its curve spread with benchmark 10-year yields widened to around 34 basis points, against only 16 basis points per year. A week ago.

An inverted yield curve is generally seen as a recession warning.

The yield on 10-year Treasury bills remained stable at 3.4178%.

Oil prices fell slightly on Friday. U.S. crude stabilized 0.6% at $86.82 a barrel and Brent fell a similar margin at $92.65.

Gold was slightly higher. Spot gold was trading at $1703.02 an ounce.

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Reporting by Stella Qiu; Editing by Stephen Coates, Ana Nicolaci da Costa and Sam Holmes

Our standards: The Thomson Reuters Trust Principles.

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