Asian shares fall as US debate unfolds, yen gains: Markets close

(Bloomberg) — Asian stocks slipped Wednesday on growth concerns ahead of a U.S. inflation report and as traders weighed the fallout from the presidential debate. The yen strengthened after a Bank of Japan board member signaled more interest rate hikes.

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A gauge of shares in the region fell for a third session, with benchmarks in Japan and Hong Kong leading decliners. Concerns about global growth resurfaced as oil fell below $70 on Tuesday and Treasury yields fell ahead of the U.S. consumer price index later on Wednesday and the Federal Reserve’s policy meeting next week.

In currencies, the greenback edged lower, while the yen gained to its strongest level against the greenback since January after a Bank of Japan policy official said the central bank would continue to adjust its policy easing whether the economy and prices will perform as expected. Junko Nakagawa said financial conditions are still easy even as the BOJ hikes.

The showdown between Vice President Kamala Harris and former President Donald Trump may provide more clarity for traders who have been scrutinizing campaign language around tax proposals, government spending plans and policies on energy, electric vehicles, health care and more. The Treasury yield curve has tilted this year on concerns that the US deficit will worsen, with Trump’s policies seen as potentially inflationary.

“The way the debate plays out could affect market sentiment and cause some movement in the dollar, which would directly affect exports and the trade balance in Asia,” said Billy Leung, investment strategist at Global X Management in Sydney. “A stronger dollar could hurt the competitiveness of Asian exporters, while a weaker dollar could boost exports but raise inflation concerns in the region.”

In China, onshore stocks are poised to fall to five-year lows hit in February as gloomy sentiment permeates the market as the nation’s fragmented stimulus increasingly falls short of boosting earnings and the economy.

Markets will be looking for clues about the future direction of US-China relations during the debate, with the region’s defense, biotech and banking companies under the microscope. Market jitters are also expected to increase, with a three-month measure of implied volatility for a key Bloomberg dollar indicator near its highest level since the March 2023 banking crisis.

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Traders in the US interest rate options market are still betting on at least one very big Fed rate cut this year – just probably not before the November 5 US election. Forecasters expect a monthly consumer price report to show another month of subdued gains, possibly contributing to a Fed debate over how much to cut interest rates.

“Given aggressive market expectations for a Fed rate cut, a hotter reading should lead to downside volatility,” said Sameer Samana of Wells Fargo Investment Institute. “A cooler print has more two-way risks because it creates more room for the Fed to taper, but it may also indicate that the economy is slowing faster than anticipated.”

Crude has fallen by nearly a fifth so far this quarter on concerns that slowing growth in the U.S. and China, the main consumers, will dampen demand at a time of robust and expanding supplies. West Texas Intermediate crude rebounded in early trade after falling as much as 5% in the previous session. Copper and aluminum also fell after trade data from China provided evidence of weakening domestic demand for the metals.

Back in the US, the S&P 500 rose 0.4%, with a Bloomberg gauge of the “Magnificent Seven” megacaps up 1.5%. Tesla Inc. led gains in Wall Street’s megacaps on Tuesday, and Oracle Corp. reached an all-time high. JPMorgan Chase & Co. fell more than 5 percent after tempering its earnings optimism, and Bank of America Corp. said investment banking results would be lower than some expected.

Key events this week:

• US CPI, Wednesday

• Japan PPI, Thursday

• ECB rate decision on Thursday

• US Initial Jobless Claims, PPI, Thursday

• Industrial production in the euro area, Friday

• Industrial production in Japan on Friday

• U. Michigan Consumer Sentiment Friday

Some of the main movements in the markets:

Stocks

• S&P 500 futures were down 0.2% as of 10:46 a.m. Tokyo time

• Nikkei 225 futures ( OSE ) fell 0.6%

• Japan’s Topix fell 0.6%

• Australia’s S&P/ASX 200 fell 0.3%

• Hong Kong’s Hang Seng fell 1%

• Shanghai Composite fell 0.5%

• Euro Stoxx 50 futures were little changed

Coins

• The Bloomberg Dollar Spot Index fell 0.1%

• The euro rose 0.1% to $1.1036

• The Japanese yen rose 0.4 percent to 141.94 per dollar

• The offshore yuan rose 0.2 percent to 7.1223 per dollar

• The Australian dollar was little changed at $0.6657

Cryptocurrencies

• Bitcoin fell 0.6% to $57,202.41

• Ether was down 0.6% at $2,363.78

BONDS

• The 10-year Treasury yield was little changed at 3.64%

• Japan’s 10-year yield fell 3.5 basis points to 0.855%

• Australia’s 10-year yield fell two basis points to 3.89%

commodities

• West Texas Intermediate crude rose 0.6% to $66.14 a barrel

• Spot gold rose 0.1% to $2,520.44 an ounce

This story was produced with the help of Bloomberg Automation.

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