(Bloomberg) — Japanese stocks fell on Monday after the ruling party’s election raised expectations of further interest rate hikes by the central bank. Iron ore soared after major Chinese cities eased restrictions on home purchases.
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Both the Nikkei and Topix indices declined after Rep. Shigeru Ishiba won the primary for the Liberal Democratic Party. Ishiba said he supported the Bank of Japan’s independence and normalization path in principle and that Japan must overcome deflation. The yen, which soared after Ishiba’s selection, showed a downward trend on Monday.
“This is about dollar-yen,” Daniel Lam, head of equity strategy at Standard Chartered Wealth Solutions, told Bloomberg Television’s Shery Ahn and Haidi Stroud-Watts. “The new leadership will take a more hawkish stance.”
Australian stocks rose and Korean stocks fell, while Hong Kong futures were flat. US contracts rose slightly. Iron ore futures surged in Singapore after the cities of Shanghai, Guangzhou and Shenzhen eased rules on home purchases in the central government’s latest efforts to support the beleaguered property sector.
Markets are heading into the final quarter as stimulus from China improves the global economic outlook and central banks from Indonesia, Europe and the United States begin to cut interest rates to support growth. U.S. stocks are expected to outperform Treasuries for the remainder of the year, while emerging markets are favored over developed markets, according to the latest Bloomberg Markets Live Pulse survey.
Traders are bracing for big moves in Chinese stocks on Monday as economic activity data is released in the final trading session before markets close for Golden Week after the benchmark CSI 300 posted its best week since 2008. The Shanghai Stock Exchange conducted a weekend stress test for securities firms. After the system struggled to cope with a surge in trading activity on Friday.
The new demand comes after authorities stepped up efforts to revive growth with promises to support fiscal spending and stabilize the property sector. Stephen Jen, CEO of Eurizon SLJ Capital, said a “serious rise” in stocks, yuan and government bonds was entirely possible because investors were undervaluing the country’s assets.
But sentiment could weaken globally on Monday if tensions in the Middle East rise. Oil prices have remained steady since Israel killed Hezbollah leader Hassan Nasrallah in Beirut, and markets are waiting to see how Iran will react.
Iran’s embassy in Beirut said Israeli airstrikes were escalating to dangerous levels and that appropriate punishment would be meted out. But President Massoud Fezeshkian did not promise a direct, immediate attack on Israel in retaliation.
“For markets, it depends on what Iran decides to do,” Minna Kuusisto of Danske Bank said in a note to clients. “If a full-scale war breaks out in Lebanon, another war will come to Europe’s doorstep.”
This week traders will be paying attention to China’s official PMI and the Caixin Manufacturing and Services PMI on Monday before markets close for Golden Week. Data on euro zone inflation and manufacturing activity are due ahead of the U.S. jobs report on Friday, which will help assess the Federal Reserve’s prospects for a year-end interest rate cut.
The main movements in the market are:
stock
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S&P 500 futures were up 0.1% as of 9:05 a.m. Tokyo time.
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Hang Seng futures little changed
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Japanese Topix fell 2.7%
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Australia’s S&P/ASX 200 index rose 0.6%.
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EuroSTOXX 50 futures rose 0.8%.
call
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The Bloomberg Dollar Spot Index was little changed.
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The euro was little changed at $1.1169.
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The Japanese yen fell 0.3% to 142.64 per dollar.
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The offshore yuan was little changed at 6.9765 per dollar.
cryptocurrency
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Bitcoin fell 0.5% to $65,485.82.
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Ethereum fell 0.2% to $2,655.15.
bond
necessity
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West Texas Intermediate crude rose 0.1% to $68.26 per barrel.
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Spot gold rose 0.3% to $2,665.23 per ounce.
This article was produced with help from Bloomberg Automation.
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