By Adam Haigh
Commonwealth Bank of Australia’s Elias Haddad discusses the Japanese economy and currency markets.
The yen climbed to a 15-month high as traders probed Japanese officials’ tolerance for appreciation, hurting the nation’s stocks in what was otherwise a mixed session for Asian equities Wednesday ahead of a key U.S. inflation report.
Treasuries and bunds also advanced, along with gold, giving the moves the flavor of a shift to havens. The dollar weakened against most major currencies. Japan’s Topix index fell to a four-month low. Futures on the S&P 500 Index rose as did shares in Hong Kong and Seoul. Stocks fluctuated in Shanghai before a week-long Lunar New Year holiday.
While U.S. equities are recouping some of the $2 trillion wiped out in the rout last week, Japanese stocks are 11 percent below their January highs. GMO’s James Montier said U.S. stocks were “obscenely overvalued,” citing the Shiller price-earnings ratio, which shows that U.S. stocks are at the second-most-expensive level ever, topped only by the technology bubble of the late 1990s. He also referenced a recent Bank of America Merrill Lynch survey showing the highest level ever of fund managers saying the market suffers from “excessive valuation.”
American consumer-price data due Wednesday could give some clues on where markets are heading, with investors assessing the outlook for inflation and what it means for the trajectory of U.S. monetary policy. New Chairman Jerome Powell suggested the Federal Reserve would forge ahead with gradual rate increases even as it keeps an eye on financial system risks following the recent equity rout.
Elsewhere, oil drifted close to $59 a barrel after its worst week in two years as fears over rising U.S. crude supplies curb investor optimism.
Terminal users can read more in our markets blog.
Here are some important things to watch out for this week:
- Lunar new year celebrations for the Year of the Dog begin, affecting China, Hong Kong, Taiwan, Singapore, Malaysia and Indonesia. Chinese mainland markets are closed Feb. 15-21.
- The U.S. consumer-price index probably increased at a moderate pace in January, economists project. Retail sales in the U.S., also out Wednesday, probably increased for a fifth straight month.
- Earnings season continues in full swing with reports including companies from Bunge to Nestle.
These are the main moves in markets:
- The MSCI Asia Pacific Index rose 0.3 percent as of 4:17 p.m. Tokyo time.
- Topix index fell 0.8 percent.
- Hong Kong’s Hang Seng Index gained 1.7 percent.
- Kospi index rose 1.1 percent.
- Australia’s S&P/ASX 200 Index fell 0.3 percent.
- Futures on the S&P 500 Index rose 0.3 percent.
- The Bloomberg Dollar Spot Index fell 0.2 percent.
- The Japanese yen rose 0.6 percent to 107.22 per dollar.
- The euro rose 0.2 percent to $1.2376.
- The yield on 10-year Treasuries fell one basis point to 2.82 percent.
- Japan’s 10-year yield fell less than one basis point to 0.067 percent.
- West Texas Intermediate crude fell 0.2 percent to $59.09 a barrel.
- Gold rose 0.4 percent to $1,334.31 an ounce.
- LME copper rose 0.5 percent to $7,019.50 per metric ton.
— With assistance by Tom Redmond