(Bloomberg) – Asian shares swung between gains and losses on Friday as investors weighed risks to global markets after a volatile week when policy decisions by central banks raised uncertainty.
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Japan’s Topix index fell again Thursday after recovering from an earlier loss of 1.8%. Benchmarks in China and Hong Kong gained, while declines in Korea and Australia declined. MSCI’s Asia-Pacific index fell, and is down 1.9% for the week. The dollar fell against major currencies, including the yen.
Thursday’s summary of views from the Bank of Japan’s meeting last week, when it raised rates, showed one member identified a neutral rate at 1%, while others called for an appropriate rate hike to prevent rapid increases.
Global markets have been shaken in the past week as investors prepare for the US and Japanese central banks to move in opposite directions, further undermining the yen’s role as a source of cheap funding for financial assets.
This is a “period of consolidation before a new trend, due to the volatile market,” said Kerry Goh, chief investment officer at Kamet Capital Partners Pte. “Investors will likely hold off until new data emerges. The next few days will be crucial – either a quiet return or we will see new volatility emerge.
The Nikkei 225 and Topix have recovered about half of their losses since late July, when the Bank of Japan raised key rates. Japan’s benchmark 10-year yield fell for a second day.
Three-quarters of carry trades have been wiped out as the recent downturn wiped out all of the year’s positive gains, according to strategists at JPMorgan Chase & Co.
The carry strategy – which involves borrowing at low rates to finance purchases of higher-yielding assets elsewhere – has been wobbling for months. Conduct trades were pummeled over the past week as global market volatility jumped amid fears of a swift Federal Reserve interest rate cut and after a bigger-than-expected Bank of Japan rate hike.
The unspooling of trades does have more room to run but the slowing pace of the shift allows investors to breathe a “sigh of relief,” according to Quincy Krosby at LPL Financial. “A softer dollar, driven by market perceptions that the Fed is about to begin an easing cycle, should help support that stronger – negative for trade.”
Investors watched Thursday’s U.S. jobless claims data for another cue. Markets have been on a tailspin since last week’s weak economic data fueled concerns that the Fed’s decision to hold rates at a two-decade high could lead to a deeper economic slowdown.
The dollar was weaker Thursday, reversing moves from the previous session. Weak demand for the 10-year Treasury auction and $31.8 billion in debt offerings from blue-chip companies is a problem.
The results of the Treasury auction “are consistent with our view that we should see a sustained correction higher in yields in the near term,” said Zachary Griffiths, head of investment grade and US macro strategy at CreditSights. “The repricing following what was essentially just a fairly weak payrolls report is very visible.”
Shares of Lasertec rose as much as 23%, the most since January 2015, after the Japanese semiconductor company reported strong fourth-quarter results from record orders.
Oil was steady after its biggest advance in a week, with markets on edge over possible revenge attacks by Iran on Israel as payback for the killings of Hamas and Hezbollah leaders.
This week’s highlights:
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German industrial production on Thursday
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US initial jobless claims on Thursday
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Fed’s Thomas Barkin said, there
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China PPI, CPI, Friday
Some of the main movements in the market:
Savings
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S&P 500 futures were unchanged as of 1:30 p.m. Tokyo time
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Nikkei 225 futures (OSE) down 0.3%
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Japan’s Topix down 0.4%
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Australia’s S&P/ASX 200 fell 0.3%
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Hong Kong’s Hang Seng rose 0.7%
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Shanghai Composite rose 0.4%
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Euro Stoxx 50 futures down 0.9%
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Nasdaq 100 futures rose 0.2%
currency
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Bloomberg Dollar Spot Index down 0.2%
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The euro rose 0.1% to $1.0936
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The Japanese yen rose 0.3% to 146.21 per dollar
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The offshore yuan rose 0.3% to 7.1656 per dollar
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The Australian dollar rose 0.6% to $0.6559
Cryptocurrencies
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Bitcoin rose 3.4% to $57,031.84
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Ether rose 3.6% to $2,435.25
Bond
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The yield on 10-year Treasuries fell three basis points to 3.91%
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Japan’s 10-year yield declined two basis points to 0.855%
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Australia’s 10-year yield unchanged at 4.08%
Commodity
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West Texas Intermediate crude rose 0.1% to $75.31 a barrel
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Spot gold rose 0.5% to $2,393.81 an ounce
This story was produced with the help of Bloomberg Automation.
–With help from Abhishek Wisnoi.
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