Monday 5.08am BST. Asian stock markets started the week on a quiet note, latching on to a negative lead from Wall Street as the recent central bank-fuelled rally took a breather.
The prospect of the Federal Reserve keeping monetary policy accommodative for longer in 2017 gave global markets a boost in the latter part of last week, and provided some steadiness after the Bank of Japan’s myriad tweaks to policy had unsettled traders.
Oil prices were recovering in Asia amid speculation about the outlook for a global supply freeze. Prices sank 4 per cent on Friday as Saudi Arabia signalled that this week’s informal Opec meeting in Algeria would not yield a formal decision on production cuts.
However, it was reported that Algeria’s energy minister said over the weekend that Saudi Arabia had offered to cut its output to January levels. Brent crude, the international benchmark, gained 0.8 per cent to $46.27 a barrel and West Texas Intermediate rose 0.7 per cent to $44.81.
Japanese stocks were weaker in Monday trade. The Topix, down 0.7 per cent, continued a run of relative outperformance versus the exporter-dominated Nikkei 225, which lost 0.8 per cent as the yen strengthened for the first time in three sessions.
The Japanese currency was trading 0.1 per cent stronger on Monday at ¥100.91 per dollar. Despite weakening on Thursday and Friday, the yen’s 1.2 per cent strengthening over the week was its best performance in nearly two months as traders were disappointed by the BoJ’s decision to keep interest rates unchanged and deliver a multitude of tweaks to policy that have been met with scepticism.
Shuichi Ohsaki, Japan economist at Bank of America Merrill Lynch, doubted if the BoJ’s decision to cap the 10-year Japanese government bond yield at zero per cent and allow for an overshoot of its 2 per cent inflation target would boost consumer prices.
“The monetary base has hugely expanded since quantitative and qualitative easing was introduced in April 2013, but amid weak growth in bank lending, the rise of money stock has been limited,” he said.
“The BoJ was already committed to positive inflation, so we will have to watch future developments to see what effect the BoJ’s new inflation-overshooting commitment has on people’s price expectations.”
That is likely to see Japanese inflation figures for August, due on Friday amid a raft of other closely watched domestic data, come under additional scrutiny from analysts and traders.
The yield (which moves inversely to price) on benchmark 10-year JGBs was down by 0.6 basis points to minus 0.051 per cent. The yields on the equivalent bonds of Australia and the US were also trading lower in Asia on Monday.
Australia’s S&P/ASX 200 was down 0.1 per cent, eyeing its first decline in five sessions, led by declines in the defensive consumer staples, healthcare and telecommunications sectors.
Hong Kong’s Hang Seng lost 0.7 per cent — its largest one-day drop in almost a fortnight — while China’s two main benchmarks in Shanghai and Shenzhen were both down 0.8 per cent.
On Friday, the S&P 500 closed 0.6 per cent lower, but still ruled off on a 1.2 per cent gain for the week — its best weekly performance since mid-July. European stocks declined 0.7 per cent.
Gold, was down 0.3 per cent at $1,334.15 an ounce, while the US dollar index, a measure of the greenback against a basket of global peers, was flat at 95.453.
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